Q3 2021 Rush Street Interactive Inc Earnings Call

Good day, ladies and gentlemen.

Thank you for standing by and welcome to the R. S. I third quarter, 2020 One earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference call is being recorded today November 10th 2021.

I will now turn the call over to Maureen Siler Associate Vice President of Investor Relations and development.

Thank you operator, and good afternoon by now everyone should have access to our third quarter 2021 earnings release. It can be found under the heading financial quarterly results in the investors section of the Rsi website at Russia Interactive dotcom.

Our comments will be forward looking statements within the meaning of the federal Securities laws forward looking statements are not statements of historical facts and are usually identified by the use of words, such as will expect should or other similar phrases are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect we assume no responsibility.

For updating any forward looking statements.

Therefore, you should exercise caution in interpreting and relying upon them. We refer you to our SEC filings for more detailed discussion of the risks that could impact our future operating results and financial condition.

During the call we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

A reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 2021 earnings release, which is available on the investors section of the Rsi website at Www Dot Rush Street interactive Dot com.

With me on the call today, we have our CEO, Richard Schwartz and our CFO Kyle Sauers, we will first provide some opening remarks, and then open the call to questions.

With that I'll turn the call over to Richard.

Thanks, Laura good afternoon, everyone. Thanks for joining the call.

Several topics I'd like to cover today.

First I'll highlight another quarter of record revenues.

And the raising of our full year revenue guidance.

This quarter represents the ninth quarter in a row.

Same store revenue growth for resi.

Next I'll give an update on our market analysis initiatives.

Exciting recent developments on new market opportunities.

Then I will talk about our operational and marketing excellence.

And finally, I'll walk through product and technology rollout.

And drive our differentiated user experience.

Before handing it over to Kyle to dive deeper into our financials.

Once again, our team delivered another solid quarter of year over year growth.

Well as sequential revenue growth demonstrating our continued ability to grow top line, while strategically investing in marketing and technology areas, We expect will drive meaningful revenue growth and long term value.

Revenue was $123 million during the quarter.

Representing a year over year increase of 57%, which.

Which included revenue growth in all of our online casino and online sports with market.

With this continued success and growth in our business we.

We are once again raising our guidance.

We now expect our 2021 full year revenue to be between $480 million and $500 million.

Implying 76% year over year topline growth at the midpoint.

This is up from the previous estimated revenue growth of 72% at the midpoint of our prior guidance range.

I will provide some additional details in his remarks.

Before I get into recent launches.

I wanted to first address the news I'm sure. Many of you saw earlier this week.

We are thrilled to have been selected to operate our award winning online sports betting platform in the state of New York.

Our site has a strong track record of success in New York overseeing the operations of the vet reverse sports book in Schenectady, New York.

But new York isn't the only exciting new market to discuss.

Subsequent to quarter end on October 12, we announced the soft launch of a place to grow online sports book in Connecticut.

The full launch occurred on schedule on October 19.

And since then we've been delighted to bring our award winning products and our players to Connecticut.

Bruce as far as the partner of the Connecticut Lottery.

We have subsequently launched for retail sports books wagering locations in the state of Connecticut.

New Haven Stamford.

In Windsor, all of which we opened over two weeks ago.

And most recently yesterday, we opened our fourth book and New Britain.

We expect another six locations to be open over the coming weeks.

During the third quarter, we also announced a partnership with the Arizona Rattlers.

As their partner for online sports betting in the state of Arizona.

And we were eager to launch but reversed an update there in October.

We now operate real money gaming and 13 jurisdictions.

Five of which have online casino 11 that have online sports betting and six with retail sports betting.

We also announced that we've entered the Canadian market with the launch of our social gaming platform casino forefront in.

In the province of Ontario.

Free to play online Casino and sports book is available now on all devices through the vet river's platform.

As we've shared before.

Had great success in markets like Pennsylvania, Michigan with converting prelaunch, social players into real money betters.

In fact in Michigan more than 20% of our prelaunch social players have opened a real money account it made first deposits.

We are hoping for similar results in Ontario, as we expect to launch real money online casino and sports betting in the coming months.

We are really enthusiastic about the opportunity in Ontario, given the size of the market and the ability for us to offer both online casino and sports in the jurisdiction.

I'd like to now shift and talk about market access.

While we have continued to make strong progress in launching several new states over the past year.

We have also made significant strides in our new market access initiatives.

We're now live with online sports book in States, representing 24% of the U S population.

And lie with online casino in states, representing 10% of the population.

The anticipated upcoming launches in Louisiana.

<unk> and New York will increase our sports with population by 9% up to 33%.

And our entry into Ontario will increase our addressable population of online casino players by over 40%.

Our business development team is working to secure access and future market.

But we are excited to have put ourselves in a strong position already with market access plan in 'twenty, one online sports betting market in 19 online casino markets.

I now want to turn to some specific highlights from the quarter and exciting trends we are seeing.

Connecticut is off to a strong start.

While it's still early we've seen really solid progress thus far.

Over the last two weeks in terms of the handle <unk>.

Medicaid is already our third largest online sports book only market.

In Illinois, we continue to hold share very well.

September data that came out earlier this week showed us with our largest share of gross revenue in the last seven months.

A great Testament to the user experience, we provide and our ability to retain high quality players.

In Michigan we.

We have held steady or with our online casino market share.

Looking forward to soon being able to offer our players an iOS app.

Ruth friction and further improve the user experience.

In West Virginia.

To grow online casino share since we entered the market back in April.

And we are now approaching 10% market share.

This is another market, where launching iOS app for the first time will be exciting for our players.

And we expect will improve player satisfaction.

Lastly in Colombia. During recent months, we are close to 20% market share of handle for combined online casino and online sports.

And we again grew revenue significantly greater than 100% year over year.

This is a tremendous achievement given our entry into that market. Several years. After his first opened.

As I discussed earlier, there will be plenty of new markets to invest in overcoming corners.

Which will put us in the investment mode for the time being.

We are proud of our ability to remain disciplined and calculated and the way, we invest and ultimately generate substantial profitability from markets as they mature.

Now I would like to switch gears to talk about some of our marketing initiatives investments and the results we're seeing from them.

To start we recently signed two new brand ambassadors Tibet rivers.

And this great and respective tenants T V analyst James Blake and three times Super Bowl champion and NFL Broadcasting veteran March Lewis.

We are proud of how these two join our other ambassadors as we create new and exciting betting content.

Layers to enjoy.

Yes.

We're also excited to launch several hyper local sports betting podcast.

In major cities across the country via our city Caf programming, including in the cities of Chicago, Detroit, Pittsburgh, Philadelphia, and New York and Denver.

Stay tuned for upcoming launches in many more cities in the future.

This is an effective way to use local talent.

Talking about local hometown teams to engage players and enhanced loyalty because we know many betters preferred a better on our local teams.

We recently announced that we've expanded our commitments to college football by signing an exclusive partnership for bet rivers Dot Com with a few of those 68 in the field of 12 media network.

This shows hosted by former college football and basketball stars offer our players unique insights into betting on college sports.

Our ability to market effectively is critical to our success.

We remain a data driven organization.

Using dynamic learnings and analytics to acquire convert retain and reengage customers.

Real time insights from our business intelligence team allow us to continuously optimize our marketing spend based on a return on investment focused model. This is mark.

Because theres a variety of factors, including the products offered in the jurisdiction.

The performance of a diversified marketing channels.

Predicted lifetime values.

And behaviors of customers across various product offerings.

When it comes to the efficiency of our marketing we continue to see great results.

We still have an average payback period of six months for all of our cohorts since inception.

With year, one and year three payback of four times and five six times respectively.

Our marketing spend during the first three quarters of this year was 34% of our revenue, which we believe to be near industry lows.

Demonstrating our ability to convert marketing investment dollars into topline revenue.

Given the strong results, we have accelerated our marketing investments.

And have extended payback period, slightly but will only do so prudently with an eye on long term profitability.

Now turning to products and technology as usual, it's been a very busy quarter for a bunch of neurology and product development perspective here at Rsi.

As we continue to focus on providing best in class user gaming experience.

We recently launched our own dedicated and branded live Casino studios for players in Pennsylvania, and New Jersey.

Which concurrently provide blackjack table, that's exclusively for vet reverse in place you girls players to make it easier and faster for them to find a virtual seat of a popular online dealer tables.

Our focus on customer interaction and community responsiveness.

Turning to set ourselves apart from other casino platforms.

We are also excited of recently launched rush rates, a proprietary multi players locked tournament for our casino customers.

Rush Reis is the first of many exciting experiences powered by Russia Arena, our innovative multi player term and engine that will allow us to continue to stay ahead of the industry and offer a differentiated product to keep our players engaged and excited to play on our platform.

We have also seen great interest in the same game, partly feature we launched earlier this year.

In fact over 50% of our NFL betters this year.

The same game, partly wager.

When it comes to the same game, partly functionality, we have a significant point of differentiation from our competitors.

Unlike most of our peers.

Our players are able to combine multiple same game poorly.

A same game, partly with another game outcome.

Even better on a different sport.

This gives our players more ways to combine that.

And create longer odds and bigger payoffs.

Most importantly, it offers another product differentiation that creates loyalty and retention with our players.

Yeah.

We're also very proud to be recognized for iOS and cry check for improvements to our app.

Where are new that rivers App is now ranked number three out of 35 brands tested.

This is a strong validation from a respected independent source as we continued to improve functionality and user experience of our app.

As always we pay close attention to the reception to our platform, our new sports book and Casino markets from first time users when they experience are significantly upgraded out in conjunction with the new features and award winning customer service.

We are increasingly confident that we have built a market leading sports book.

We also remain on track to begin the rollout of our integrated sports and casino iOS App during the fourth quarter.

As previously shared.

Tremendous success in Pennsylvania, and Michigan are more recently in West Virginia have all been achieved without an iOS app in most markets.

We are really eager to see the benefit of enhanced player engagement through Iowa casino up when we launch it in those markets.

I also want to take a moment to congratulate all the employees of Rusty interactive for being Shortlisted for a casino operator of the year. The SBC Awards North America as.

As well as being nominated as a social operator of the year and the prestigious recognition by online gaming peers.

We're also very pleased to have won the sports book of the year.

2021 SPC Latin American awards, just a couple of weeks ago.

These awards as voted by industry experts.

A testament to the efforts of the entire Rsi team.

And a further recognition of our industry leading player experience.

With that I'll turn the call over to client.

Thanks, Richard before I dive into the numbers. It was one more very prestigious nomination of resi has been shortlisted for the SBC Awards North America, Richard failed dimension and that as leader of the year very special congrats to him and his well deserved recognition of his hard work over the years and shaping our side into the organization does today having.

Taking the company from vision to fruition during a time when many doubted whether online gaming would ever be a force in the U S.

<unk> Richard.

Onto some financial data.

As Richard mentioned third quarter revenue was $122 9 million, an increase of 57% year over year. The adjusted EBITDA loss for the third quarter of 2021 was $12 2 million adjusted.

Adjusted advertising and promotions expense was $45 4 million during the third quarter of 2021 compared to $17 5 million and the.

Here year quarter, and $36 9 million during the second quarter of 2021.

This reflects our commitment to accelerating marketing spend to take advantage of strong returns, but also a rational approach to ensuring we put our marketing investments to abuse.

<unk> marketing investments to increase meaningfully in the fourth quarter.

The fall season is offered more opportunities to attract new players and our recent launches in Connecticut, Arizona and social in Ontario have also created an opportunity to further accelerate spend.

Depending on launch timing of other markets, we could have further investments in the fourth quarter or heavier into the beginning of next year as we think about markets like Louisiana, Maryland.

Real money in Ontario.

And New York based on the exciting news earlier this week.

Our adjusted G&A grew modestly from the second quarter to the third quarter moving up to $8 8 million from $8 million in the second quarter we.

We expect this line item to continue to grow in the coming quarters as we continue to build out our development teams and corporate infrastructure to support the substantial growth, we're experiencing and continuing to expect over the coming years.

As a reminder, our adjusted EBITDA for the quarter removes the effects of share based compensation, which was $4 5 million during the quarter, while our year to date results are moved to the effects of share based compensation change in fair value of earn out interest liability and the change in fair value of outstanding warrants, which were all redeemed or expired during the first quarter.

We continue to be in great position with $347 million in unrestricted cash on our balance sheet and no debt.

Allows us to continue growing our marketing investments launching new markets quickly evaluate potential bolt on acquisitions and remain opportunistic with regards to the external investment opportunities.

As Richard highlighted earlier, we are increasing our 2021 revenue guidance for the full year to be between 480 and $500 million up from our prior range of $465 million to $495 million.

The revised range implies 76% year over year top line growth at the midpoint.

This is up from a year over year revenue growth of 72% that we were expecting on a previous call.

We're seeing strong results across the business and this increase reflects our confidence in the continued strong trends we've been seeing so far during 2021.

We've talked about new markets that are likely launching later this year or early next year, but as a reminder, our guidance only includes contributions from markets that are live as of today.

And with that operator, please open the lines for questions.

Second lien.

Well now begin the question and answer session. If you would like to ask a question. Please press star followed by one on your Touchtone keypad. If for any reason you would like to remove a question. Please press star followed by Tim again to ask a question. Please press star one.

As a reminder, if you're using a speaker phone. Please remember to pick up your handset before asking your question, we will pause briefly to allow questions to generate in Q.

The first question is from the line of Chad Bennett.

With Macquarie you May proceed.

Hi, good afternoon, and thanks for taking my question congrats on the corner.

With respect to the fourth quarter guidance can you elaborate a little bit in terms of what you've seen so far in October from a gaming competition given some of the comments that we've heard from your peers and given your approach towards disciplined promos is this something that you were able to maintain given some.

Potential irrational.

Promos that were seeing in the market. Thanks, guys.

And maybe I'll start out and just the the guidance and how we thought about the fourth quarter.

And then I'll, let Richard maybe talk a little bit about just the competitive environment and and promos and the way we approach that so.

As we as we talked about we raised the guidance by $10 million at the midpoint.

I'm pretty pleased that we're demonstrating the ability to set expectations and meet or beat them. Each time, a lot of different considerations, obviously go into our range.

More of the variability is on the sports side since the consistency of a handle on volume.

Is it a little bit higher on the online casino business, which is a bigger part of our revenue.

On the sports side calendar looks a little different than last year. We're obviously excited about all of the sports that are happening in lined up to happen in the fourth quarter here.

Probably not unlike what you've heard from others October had a tough start with.

Some low football hold for the first few weeks, it's gotten a little better over the last couple of weeks.

We've got two new state launches in Connecticut, and Arizona that were very excited about as you know.

And there's an investment early in market launches and promotions really before any real revenue starts to be generated so that probably isn't a significant factor in either direction on the fourth quarter.

But having said all that we're obviously excited to expect to have our 10th consecutive quarter of sequential revenue growth again here in the fourth quarter.

Hi, Chad in terms of the.

Yeah.

Yeah go ahead Chad.

Oh go ahead, Richard I'm, sorry, I interrupted.

I was just referencing the second half about the competitive nature of the market is thought I would just comment on that.

The market remains very competitive as new entrants come into the markets and existing.

Competitors increased their spend and aggressiveness, having said that we continue to perform well and we invested for years in developing all the elements of an experience that matter. So when it comes to your operations. Your acquisition of players who retention those are things you cant just create overnight or in a couple of months that takes years of development and expertise to build out.

So we're very comfortable that we're prepared to compete and we're seeing that we're continuing to have great results and we think despite the competition.

We operate with a very rational environment, we operate in a way that we believe has long term focus on efficient flexible marketing and I think we're seeing the results are still available for us because of the investment we've made in the past.

Great. Thank you and then my follow up just in terms of the iOS App.

Launches do you believe that that this will be.

Be incremental to the current desktop business.

Are you expecting customers to kind of use both maybe use mobile for some more snacking and then desktop for kind of longer.

Longer sessions, just trying to think about the building blocks of of of your of your or opt out.

I guess this is mainly for 'twenty two after the launches. Thank you.

Sure. We know mobile is king and obviously, having our first rated app is helping us in the sportswear market. So we know there's going to have only upside to provide to us.

And the casino markets the thing with the current setup is that you are a players are able to play on their iOS devices, but they really.

Not a very clear and seamless way and so by reducing friction from the user experience and to deliver for them a much better experience than what you're betting on things like sports and casino you wont be able to enter the app do a very quick fast I E getting their play have it available on your on your phone very easily assessable geolocation integrated into the App.

Today, where we have it today in those markets.

Communicate with messaging directly to the players whenever you have an update or bonus or promotional offers there's lots of benefits that bring an iOS app to this market is going to bring but.

But I would tell you that the number one thing is that it's the only part of our user experience and a limited markets, where you have some friction that we're very eager to get rid of.

Thank you very much I appreciate it.

Thanks, Chad.

Thank you Mr Beynon.

The next question comes from the line of David Katz with Jefferies. You May proceed.

Hi afternoon, everyone. Thanks for taking my questions.

I I I will admit I was a minute or two late but I I would love to just discuss the New York opportunity.

Obviously, the size of scale of the market and view of tax raid involved and how youre thinking about that financially and strategically.

Yeah, So maybe I'll start on the AR on the financial side, and if Richard wants to add anything he.

He can do that but yeah.

But certainly we'd prefer a lower tax rate.

But we're we're definitely confident in our ability to generate profits in New York.

We think it's a it's a market where competitors.

Likely will be less aggressive with both marketing and promotions certainly over the longer term and I think you know just given our success that we've proven time and again with keeping marketing costs, low and making efficient use of bonuses and promotions.

It seems like New York will play very well to our strengths as an efficient operator.

Okay.

And if I can just follow up on Illinois.

The in person registration is canceling next year as I understand it.

If you could just give us a couple of updated thoughts about you know.

How you maneuver in that context, as well that would be helpful.

Sure we've seen the in person registration go back and forth a few times now.

But what we have seen is that our market share is largely stay consistent and in fact, just yesterday. The announcements came out of there or the revenues came out and we were the highest number we've been out in seven months clearly what's exciting about the market now is because you've had sort of influx of new players slow down you've been able to really see who operates well in that.

You've seen that we've been able to deliver really strong growth and market share even enhancements little bit, especially most recently so when it comes to switching back off.

March or April it appears or March.

We're very prepared for our products a lot better than it was before and we clearly have some strong marketing partnerships in place and put in with the Chicago Bears and we feel that we've been able to earn and retain the player trust in this market, we're playing with our our product. So we're pretty excited to get to the chance to be able to open up.

The opportunity to increase the new player flow and be able to demonstrate to the players why we've been able to be successful in that state with our by products.

Perfect. Thank you very much.

Thank you Mr Katz.

The next question is from the line of Ryan <unk> with Craig Hallum. You May proceed.

Good afternoon, Congrats Richard on the nomination as well as all the other company nominations.

Wanted to start with average revenue per monthly active user it was up about 1% sequentially, but you have the benefit of the NFL season, starting in September I guess, what's the NFL incremental to our model and secondly, I guess does that imply.

What does that imply for Q4.

Yeah. So that's a good it's a good question and we've talked a little bit about this on the last call I think but we actually expected our MAU growth to be a little slower in Q3 due to the sports seasonality in the sports calendar that's spread across Q3 last year. So that's on the mouse.

And.

The fact is we saw a pretty meaningful increase in users in September.

Start of the football season, and that's continued again nicely into Q4 in October and November So I'd actually I'd expect the miles to move up.

Pretty nicely in Q4.

And then adjusting for any sports seasonality, we'd expect the miles to continue to grow meaningfully over time and really be the larger source of revenue growth, but to your or my question.

It's going to fluctuate a little more based on the mix of casino and sports and the launch of new markets and to your point it actually.

It probably didn't impact art mile a ton in Q3, because it was only at the NFL because it was only a part of the quarter. It will probably pull it down more likely in Q4, because we will have an influx of players who are lower art mile than our casino players and then add to that the fab.

That will have a bunch of new players in Arizona in Connecticut.

Will be incremental to the mouse, but won't be generating as much revenue in those new markets because of promotions.

Helpful. Thanks, Kyle.

On Ontario, you've launched casino for fun.

Few weeks ago any early user metrics you can share there.

Yes, there really arent any metrics that we're sharing but I think the key to that market opportunities to build our brand and build those databases early we're learning a lot about the market, making sure. The registration flows are right and making sure we're getting everything ready for the time when the market opens because obviously, we've shared before we expect that to be one of our largest markets for next year.

How does the brand building the brand using casino for fun relative to your other real money brands.

How does that resonate with customers and consumers.

So we're actually using that rivers brand in that market.

Our platform is referred to as casino for fun platform, but it's actually a bit rivers brand being utilized in our market. So since the intent is to.

Use that brand in Ontario.

We then are investing right now and building out the brand and we plan to use so there is a nice awareness in the community and the consumers in that market to the brand at a time before others are really investing the same type of dollars in that brand awareness.

That makes sense.

One more on the social casino revenues plateaued. The last three quarters here can you remind me what states you guys are alive in there and then also as you convert those to real money, which I think you said, 20% if I caught that right do they keep playing on both or is that effectively good churn there. Thanks.

Right. So we're not really investing dollars in building out our social platform other than using it as a real money acquisition opportunity. As we described we are doing in Ontario, right now than we did previously and in Michigan and before that in Pennsylvania.

That data point right about 20%.

Certainly that's an exciting number I think historically people would expect it to be under 5%.

So the fact that we're generating that kind of conversion rates I think its a real validation of the strategy that works well for us.

Having said that there are some players that are switching between back and forth between the two we've heard quite a few players when they feel like they want to be responsible with their budgets, where they feel like they spend their budget entertainment budget. They basically switched to the free to play model to engage with the product and experience and a more.

Entertainment level without any without any risk. So we do see the players do go back and forth between the two of them, but we do know that generally does it.

Direction is to convert those players from social to real money when those markets are legal.

Great I'll turn it over the others. Thanks, guys. Good luck.

Thank you.

Thank you Mr Dong.

The next question comes from the line of Jed Kelly with Oppenheimer. You May proceed.

Hey, great. Thanks for taking my question just back on the Illinois numbers.

Mentioned your G. G. R was the highest it's been in seven quarters can you talk about the impact of the same game parlay had on that.

<unk>.

Sure, it's been pretty pretty meaningful, though I would say the overall app experience improvements probably even a larger driver.

While I say that is that we've gone through before all the improvements you made in the App and there's just a tremendous amount of improvements for the price getting better and better, but having said that the silicon partly is a valuable tool as we indicated over half of our players our betters. This football season have used it we.

We have some differentiation in that product and we're really excited about also traditionally most.

Single game Parlay products and the competition really are limited to one game.

And you can't really parlay those against other bets from other games. So do you want to bet on a Brady in the box you bet the bucks to beat the spread and Brady for over 300 yards that would be the extent of you're soon going poorly we allow those players do not only that that partly but if they want they can combine that with a green Bay Packers to beat the <unk>.

Red and Britain.

Roger Roger He's got Covid, it's okay. He's a Cal Berkeley, San Francis I wouldn't have Kris Rogers go 300 yards as.

As well.

Right. So we can combine we can combine seemingly in parlays and one parlay, presumably than probably any other bad from any other sport so that nimbleness and the fact that we're also.

Opening it up for college football, so you'll get parlays, which is a really exciting a lot of it sounds like to bet on there.

Favorite teams to win and be the spread and maybe player prompts we've been adding quite a few more of those to the offering. So it has been meaningful it doesn't even the playing field and as I just said the competition only evens, the playing field, but actually in some cases has accelerated our ability to differentiate in a critical area.

And adding.

The extra gains a single game, partly is that being done through your own technology or partnering with can be I mean, who just how are your powering that.

Right. So we're leveraging that can be spreading engine for that and one thing that we noticed the big benefit is that.

Some companies are outsourcing the assumed and partly from individual companies to help sort of supplement their existing core offering but when you do that you're really limited in your ability to cross sell and do multiple partly because you have the parlay, it's coming from different sources have you have two different platforms, providing you a source there nonorganic you can't really settle the baskets as quickly and you can.

Also.

Allow you to do what we're doing which is to sort of have multiple beds didn't extend the odds of embedding for the players. So it is driven in large part by <unk>, but the way we've integrated it and the way we've unified the system. It makes it so it's really seamless for the user experience.

Got it and then.

Just two more you sort of see the success that Michigan is having with I gaming.

The numbers are phenomenal I mean, where are we with.

Neighbouring states, such as Indiana, and Illinois, potentially potentially legalizing gaming and then back to New York.

Is there any way you can leverage your Schenectady property when you enter that market. Thank you.

Sure So I can.

Casino is.

As exciting category as you know.

We're seeing a lot of the opportunities you mentioned in the Midwest, which is convenient for us given our location and.

Illinois, and Indiana or two markets that come to top of our minds in terms of future markets that we think are showing some evidence of billets being dropped I mean, just last year.

The ruble has dropped in Indiana, and Missouri as well in Illinois.

We've seen some opportunity I think for those markets to move so clearly the revenue success of the casino category vis vis the sports betting category is given the state's extra fodder to really decide to move forward in that direction.

So we're continuing to monitor these markets and lobby wood, where we can to help encourage accelerated rate. The nice thing about this is for the first time really in years.

Our competitors are really all reaching out to each other trying to focus on getting this category moving in legalized regulated so there's a lot of positive momentum and I think it's just a matter of time before a few additional markets start to open up but in the Meanwhile, we're very excited that Ontario, which will be the largest population of any online casino market.

In the U S. If it was a state is going to be opening up for us in the near future. So we're excited to have another casino market on the horizon.

And then when it comes to New York.

Yeah. So when it comes to New York.

Yes, we are working with the property on Opex on the opportunity to leverage some of the player base as we've shared publicly of all the four commercial casinos in the state that property has done the best in terms of.

Commercial sports book revenues from the retail side and Thats not necessarily a given that it should perform that well because it's not the largest land based commercial casino in the state by revenue. So it has a nice database and Theres a plan to work with them to market our brand online in that state as well.

Thank you.

Thank you Mr. Kelly.

The next question comes from the line of Bernie Mcternan with Needham and co. You May proceed.

Great. Thanks for taking the question rich.

Richard just given the movement in the stock can you just remind us of your M&A framework any holes that you want or need to fill that you could maybe take advantage of given your equity is now worth more.

Yes.

Sure so.

We haven't we haven't really what we need to be successful long term in this market we needed the market access, which we've shown we have that in all the markets as a matter of your own in house technology to drive the results that we're seeing.

Strength in casino category, which is something that a lot of companies don't have the same quality of product that we do and then just the scale that we have to really be able to do some.

Estimates and be able to justify some of the larger opportunities ahead of us things that we've mentioned that we continue to want to look for diversification of our product portfolio find ways to bring in some other product categories. There are some opportunities. There we think potentially that we're always looking at in terms of the future I think were brought up in a lot of discussions all the time because.

We have these great assets that are valuable, but there are valuable for us to be able to utilize to grow the business in the industry. So we're always open minded to explore all options, including companies that we may look at to help improve our.

Our opportunity, whether it's with brands or databases or product verticals will be the three categories that I think are most of greatest interest to us.

Got it and then in for Kyle.

Comment on the heavy marketing investment in <unk>, just wanted to see if you could provide any color on if you expect the EBITDA loss to be wider in <unk> relative to <unk>.

Yeah. Thanks, So yeah as you pointed out I mentioned in the prepared remarks, we do expense expect that the marketing expense is going to move up pretty meaningfully in Q4 from Q3.

I would expect that the given our guidance range and given the expectations currently for how some of these new states might launch and how we're spending them in Connecticut, and Arizona that the increase in marketing spend in Q4 would outpace the.

The margin benefit that we get from the sequential increase in revenues. So that probably means we're losing more in the fourth quarter than we are in the third quarter.

And then just.

Thinking more about the increase in spend.

I commented on some of it but you've got the Q4 sports calendar, so a little heavier marketing related to football trying to attract new players and all of the states that we're in.

The Connecticut, and Arizona launches and Thats always an investment when you launch a new states and then really the other upcoming launches that we've talked about on the call. It's really going to depend on the ultimate timing of those when the when the states and the regulators are ready.

That will impact how much we actually spend in Q4.

Or even into Q1 of next year I would expect both Q4 and Q1 to be bigger than Q3.

But to your specific point I would expect that the spend is bigger in Q4 on marketing and that is bigger such that the loss would be bigger in Q4 than it was in Q3.

Got it thanks for taking the questions.

Thank you Mr Chairman.

The next question comes from the line of Stephen Grambling with Goldman Sachs. You May proceed.

Hey, Thanks, maybe that's a good place to jump to just any updated thoughts on the path to profitability at any kind of puts and takes to consider along that path.

Sure.

I'll take that one.

I mean, the good news is we're already operating profitably and quite a few markets and we've we've demonstrated an ability in the past operate this business profitably.

I think thats its going to depend.

Really largely on the pace and timing of rollout of new markets.

Sports and casino and what what the competitive situation looks like in those markets and obviously theres a lot of commentary around that and we have we have <unk>.

Competitors that are behaving in different ways in different markets, but it's definitely competitive.

At this point both both in terms of <unk>.

Promotions that are offered and and outright marketing dollars that are being.

Put to work.

I think.

We're operating environment that's aggressive.

We're really doing well and our revenue guidance has us getting near 500 or $500 million. This year at the top end of our guidance, which should make us the fourth largest operator in the market.

So the near term I would say, we don't expect profitability here in the near term, but we're going to continue to invest in all the new markets that we've talked about today, hopefully we're going to see a bunch more they get approved over the next year or coming years and will continue to have opportunities to invest in and while markets more markets mature.

And eventually well have less new approved states that are that are part of that mix.

We're highly confident we're going to demonstrate strong profitability, but I think we'll wait until there's a little more clarity.

When when it will slow down or when we will have less markets new markets to focus on before we forecast a timing for profitability.

Got it makes sense and then maybe changing gears in the markets, where you have I gaming and sports betting any sense for what the split is in either revenues or users as we look at I gaming only versus sports only versus the overlap and how perhaps the path of customer acquisition maybe evolving.

So we haven't broken out the split in those states, we have shared in the past that.

Overall, our mix is.

Over several quarters, let's say, it's run between two thirds and three quarters casino.

And we were near the higher end in Q3, but that's also probably reflective of the <unk>.

The sports calendar, so I might expect that to shift a little bit towards sports in the fourth quarter and then the other thing we've pointed out is that in terms of <unk>.

Our revenue and value that is generated from our players that a casino player is worth.

Something like five times, what a sports only player is in someone who's in both is.

Even two times more the casino value. So there's a lot of value to those states, where we have both both types of players. So it's one of the reasons, we love markets like Ontario that will be going live here shortly and we expect that to be a big contributor.

Makes sense and then one last one just to clarify I think you have this slide in the deck that shows different cohorts I believe you referenced this last quarter, but I just wanted to make sure that I understand kind of what's going on at the 2020 cohort looks like its still has been.

Softening, so I guess, what's driving that and will that eventually reverse out.

Yeah I think.

I think you and I talked about on this call three months ago and it's actually.

It's a good question and a fair one and it's it's really mostly about Illinois.

And there's two things.

At play here that I would point out the first is that we we had a head start in Illinois as everyone knows before some of our competition entered the market. So part of that is just share in the market with others.

Part of the 2020 cohort of the acquired players there.

So those were helping the chart back in 2020 and early 2021, the second piece, which should reverse itself to some extent is more seasonal so you know.

A lot of the acquired players in 2020, we're from Illinois.

And Thats a sports only market. So that means we would expect to see a benefit from from that Illinois 2020 cohort in the fourth quarter.

Great. Thanks, so much.

Thank you.

Thank you Mr. Grambling.

The next question from the line of Dan Perlin, Sir with Wells Fargo. You May proceed.

Good afternoon, everyone and thanks for taking my questions. So first on just the promo spend I wanted to drill in a little bit one of your competitors recently said there was a misalignment between CAC and LTV and basically pulling back and as you've seen that level of competition in promotions certainly increase over the last few months.

I mean to what extent has your strategy pivoted or changed over this time period.

So we're still running at around six month payback.

Since inception of the business over the last couple of months of cohorts, we've seen an increasing a little beyond that so there is an additional competition edge, but we're seeing that we're still getting back a return on those players in a faster time.

Period, and what we hear others are announcing so I think it comes down to having a strong conversion rates and retention rates because if you go with conversion rates up youre going to spend that money on marketing efficiently get those players through the funnel and getting them registering and making our first deposit and of course once they're there how you treat them and how well they like your experience you offer is going to get those retention number.

Which are going to drive up those ltvs. So I would just say that.

Lot of companies in this space are spending a lot of marketing and aggressiveness, but they don't have the product down to where it needs to be at and are viewed to be at the world class level, you need to be competitive here and even though to get the product right you have to get the service right as well. So I think it just comes down to the ability to execute at a world class level on both the product and the service side to be able to deliver.

Our results if you if you're missing one piece of the puzzle.

Delivering the consistency across all interfaces with a customer you do have a real risk of not getting back that invested capital or needing to take some more time to probably mature the product or the services to get to the point, where you are going to get those returns.

Got it thanks, Richard and then just a follow up.

To what extent can you just give any color on Connecticut any early signs that maybe the competitive environment. There given it's effectively an oligopoly and maybe how that has compared with other markets such as Arizona that recently launched.

Right, So, Connecticut really exciting I would say.

As you know only three operators of licenses, including US I think what Youll see is a standalone droppings are two of the other competitors and they have the largest database starting out and we expect them to jump off to a pretty strong lead in there and their positioning but as we shared on this call.

We are very happy with the start in terms of our ability to already have the the.

The size that we have there being one of the only been live for a few weeks, we're already as we mentioned earlier already it's a top three side for us in terms of online sports, but only markets.

Seven of those markets as number three already after only a few weeks. So it shows you we have scale, there and opportunity to grow it but I think what's really exciting about the market is over time, we're going to be able to really grow that because players are going to try and multiple sites and we only have three they're going to try our side and I think you'll notice a difference in how we treat them when they try our site on top of that it was a great partnership with spartech.

Can I get a lottery with having these great retail locations that are opening up around the state.

As we mentioned yesterday, there was a fourth retail sports book opened in two more actually opening tomorrow. So we'll have a total of seven <unk> opened by the end of this week on the retail side and three more coming soon after so once those are open we're going to work very closely with our partners there to drive traffic from the land based venues to the online site.

And I think that's going to be a really useful strategy that will be successful based on seeing that strategy using other markets. So we think it's going to you can I guess it would be a market, where we may start off and just keep growing over time, because we think that we have an opportunity to really put those assets to use in a way that will be really unique for us in that marketplace.

Got it and then just one quick housekeeping item and I apologize if I missed this but did you give columbia revenue for the quarter.

We did not give exact columbia revenue that'll it'll be in our 10-Q it drew.

It grew more than 100% compared to last year.

But it's somewhere a little south of 10% of revenue.

Got it thanks, everyone.

Thank you Mr Chair.

Sure.

The next question is from the line of Edward <unk> with Roth Capital You May proceed.

Hi, Thank you for taking my question I was wondering is there or has there been any interest in launching <unk> in.

In licensing we are trying to make an agreement until license at a third party brand that might be more widely known no sports fans and maybe use that for launching a complementary sportswear product.

So we have two great brands that we use in the United States and they're both regional and national in nature and moved the rivers is little more national.

The Sugar House brand is really regional that we've expanded it from new Jersey to <unk>.

Connecticut and at the end of the day, we look at all options and consider everything.

But what we're really excited about is we've proven that is local nature of our local marketing local brands really resonate with players. So it's something that we are very comfortable with our current strategy is working as Colin referenced earlier remember for online gaming revenues in the country is spending a lot less in others are to get to that level and we feel that as a company. We always have to evaluate all options available.

Global.

But having said that we're very comfortable and very excited by the ability to continue doing what we're doing.

Great. Thank you for that and then just given some of the success that you've had with them cross selling the I gaming some.

Some of your social gaming customers I was just wondering do you think you need to make any acquisition on our social gaming side, which would maybe give you access to even larger database to target with I gaming products.

Yeah, that's definitely an interesting idea that we've definitely discussed internally certainly.

Yes.

Worthwhile idea if you can find a product that appeals to a casino demographic.

Certainly that's something that could be a nice fit with a company like ours, but you certainly have to look around for all the different options are we have a really strong business development organization that evaluates those kinds of opportunities.

Those are things that I think our COO.

It'd be relevant in the future as you look to build databases, which is something that I mentioned earlier is something that we definitely would benefit from.

Great. Thank you.

Thank you Mr Engle.

The next question.

Line of Mike Hickey with the benchmark company you May proceed.

Hey, Richard Loren Congrats on the quarter guys. Thanks for taking my questions.

On Canada, just kind of curious.

How significant the grain market is there.

And how competitive that the operators are.

Okay.

Sure.

Great question and I think it comes down to really no one knows the answer for the no one really knows the answer on the scale and size. When we do know is that most of the market. Historically there has been a great market is really focused pretty heavily on.

The sports book side of things, So certainly I think theres going be some players already in databases of platforms that may also be competing in the regulated market.

The casino side, though one thing we're excited about his ability to really promote the social casino product. There. It's an audience that may not be as familiar with a casino brand as we're focusing on in the casino category give players early exposure to type of experience that we have.

Range way, Michigan was the opposite where Michigan had a very large retail database from several of the operators. There right away you saw those players come online here. The question will be how much of the gray market sites that are able to transition without any sort of delay.

<unk> seen in some European markets, some of those European markets and delay the ability to kind of launch.

Gray market site into real regulated market here that is going to be.

No delay so I think it's going to be interesting to see how many of those brands.

Do cross sells to the.

Sports book real real money marketing, but I think the advantage we have as I said is that the casino category. It really hasnt been one that's been heavily promoted in that market in the past nowhere near as much as the sports book So for someone like US who obviously is very attractive to the casino opportunity. There, we think that market will be exciting for us.

Nice thank you just to clarify that.

The existing operators.

I would anticipate that they in fact.

Yes.

<unk> licenses.

Then as opposed to sort of thing under there.

No the current construct.

Sort of where do they can they space or you know in the grain market and continue to compete.

Well, it's kind of a hybrid my understanding is they will actually be able to convert from the gray market to a regulated legal market environment by applying for same license than us that we will be applying for it.

Okay.

And then in New York are you able to leverage the reverse retail casino there in terms of you know.

Database or not.

Any other opportunities Dakota mentioned, an advantage in that market.

Yes, the plan is to do so.

Yeah.

Alright.

Last question.

20% share in Colombia.

You're late you sort of arrived on the scene late <unk>, you've had a lot of success with that sort of encourage you.

Beyond Columbia, and sort of the broader Latin America landscape for sort of expansionary growth. Thanks, guys.

Thanks, Yes, it does really does give us extra confidence and validation that our strategy of going into that market and not giving it a short.

Not being short term focus of really building out the product localizing in localizing. The teams developing strong leadership teams and really preparing ourselves for the next phase of expansion. We were correct. When we anticipated years ago that that market would be one that would.

Have a great opportunity for growth, but also be a stepping stone for other markets in the region. Since then you've seen Brazil has legalized sports betting the.

The regulations are still being worked on.

We're hearing some rumors without maybe nearing conclusion, there which would be a positive Argentina has been legalizing Mexico's legalizing, we're talking about large populations and what's exciting is that the payment vendors that banks, we use the location providers.

Teams the products the language of the say all the things that we invested so heavily and are going to work really well for those other markets and so we think we have a real advantage to be able to take the success, we've had in Colombia and export that ore really leverage that to other markets and the regions I would say that the answer is yes, that's an area of high interest for us the region and I think the strategy to go.

Early and really build the technology to market on our same platform that we're going to use for other markets was really helpful. A lot of companies now that kind of a coming into the market late are looking to buy local companies. There. But then you have the local companies already on their own platforms different from long term global platform with the operator. These films exist coexist with two different platforms, which creates a lot.

Good efficiencies for US we are confident that when we do go to other markets in that region that obviously will be using the same platform that we use globally, which will create a lot of efficiencies for our development organization and making sure the marketing between all the different markets are all utilizing the same tools. So we're real excited for that region in the future given the success, we're having in Colombia.

Alright, Thanks, guys best of luck.

Thanks, Mike Thanks, Mike.

Thank you Mr. Kim.

No additional questions waiting at this time I would now like to turn the conference back over to Richard Schwartz for any closing remarks.

Thanks for the great questions.

In closing I'd like to repeat what I shared last quarter no time in our history at Rsi have I've been more excited about how strongly we are positioned to succeed in this dynamic industry.

We are strong and we are growing stronger by the day.

We continue to successfully gained market share across.

New markets, including very heavily contested ones like we just experienced in New York and Connecticut.

We have ample growth opportunities ahead of us.

For example in the last six months, we entered two markets.

Arizona, Connecticut with a population of 11 million people.

In the next six months, we're going to enter Ontario, New York Merrill Lynch, Louisiana.

Which is about four times the population of 45 million people in these markets compared to $11 million in the last six months. So a lot of growth ahead for us out of us.

We continue to demonstrate our ability to grow the topline while remaining flexible and prudent in how we invest in marketing.

And when the rest of the industry begins to rationalize how they market and bonus players. We believe we will have a sustainable competitive advantage as nothing will change for us as we're already operating rationally today.

This is why the best is ahead for resi.

Thank you for joining <unk> third quarter 2021 call.

That concludes the rest street and interactive third quarter 2021 earnings call I Hope you all enjoy the rest of your day you may now disconnect your lines.

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