Q3 2023 Rush Street Interactive Inc Earnings Call

Good day, ladies and gentlemen, thank you for standing by welcome to the Rush Street Interactive third quarter 2023 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 <unk> 2023.

I'll now turn the call over to Kyle Sauers, Chief Financial Officer. Please go ahead.

You operator, and good afternoon by now everyone should have access to our third quarter 2023 earnings release. It can be found under the heading financials quarterly results in the investors section of the Rsi website at Rush Street Interactive dotcom.

Some of our comments will be forward looking statements within the meaning of the federal Securities laws forward looking statements are not statements of historical fact 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.

Unknown Attendee: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Rush Street interactive third quarter 2023 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 1st, 2023.

Our responsibility for updating any forward looking statements. Therefore, you should exercise caution in interpreting and relying on them.

For you to our SEC filings for a 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.

Kyle Sauers: I'll now turn the call over to Kyle Sauers, Chief Financial Officer. Please go ahead. Thank you operator and good afternoon. By now, everyone should have access to our third quarter 2023 earnings release. It can be found under the heading financial quarterly results in the investor section of the RSI website at Rush Street Interactive.com. Some of our comments will be forward-looking statements within the meaning of the federal securities laws, forward-looking statements are not statements of historical fact and are usually identified by the use of words such as will, expect, should, or other similar phrases and are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

Reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 2023 earnings release, and our Investor deck, which is available on the investors section of the Rsi website at Rush Street Interactive Dot com.

Kyle Sauers: We assume no responsibility for updating any forward-looking statements. Therefore, you should exercise caution and interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results in financial condition. During the call, we will discuss our non-gap measures, which we believe can be useful and evaluated in the company's operating performance. These measures should not be considered an isolation or as a substitute for our financial results prepared in accordance with GAP.

With me on the call today, we have Richard Schwartz Chief Executive Officer will first provide some opening remarks, and then open the call to questions with that I'll turn the call over to Richard.

Thanks, Kyle and good afternoon, and thank you for joining us today as we discuss our third quarter 2023 results.

We have spent more than a decade building and continuously refining and operationalize in our technology platform to support our product suite and offer a frictionless experience for customers.

Our goal from the beginning has been to develop an experience that retains customers.

Kyle Sauers: A reconciliation of these measures to the most directly comparable GAP measure is available in our third quarter 2023 earnings release and our investor deck, which is available in the investor section of the RSI website at Rush Street Interactive.com.

In today's landscape we are unique.

Digital first operator, with an eye casino and customer centric approach.

We have consistently maintained that as the industry grows and matures.

Kyle Sauers: With me on the call today, we have Richard Schwartz, chief executive officer. We will first provide some opening remarks and then open the call to questions.

Consumers were naturally gravitate towards divest products.

As the Plainfield levels with the tide of marketing and aggressive sing dollars slowly Washington, a way that is what we are seeing.

Richard Schwartz: With that, I'll turn the call over to Richard. Thanks, Kyle.

Richard Schwartz: Good afternoon, and thank you for joining us today as we discuss our third quarter 2023 results. We have spent more than a decade building and continuously refining and operationalizing our technology platform to support our product suite and offer a frictionless experience for customers. Our goal from the beginning has been to develop an experience that retains customers. In today's landscape, we are unique. A digital first operator with an eye casino and customer eccentric approach.

Consumers are being more discerning and deciding where they want to play based on product and user experience.

Our third quarter results offer further evidence that we continued to grow in very competitive markets with remarkable success and resilience.

Revenue for the quarter was $170 million up 15% versus the prior year quarter.

We are seeing that growth come from both increasing handle across products and higher sports solid due largely to our ability to innovate, which I will get to shortly.

Richard Schwartz: We've consistently maintained that as the industry grows and matures, consumers will naturally gravitate toward the best products. As the playing field levels, with a tide of marketing and aggressive bonusing dollars slowly washing away, that is what we are seeing. Consumers are being more discerning and deciding where they want to play based on product and user experience.

We're also growing our revenue much more efficiently as our adjusted marketing spend was 24% lower compared to the same quarter last year the.

The result is we were increasingly profitable on an adjusted EBITDA basis.

And significantly improved compared to a year ago.

In fact for the nine months year to date, we've improved our adjusted EBITDA by over $70 million compared to last year.

Richard Schwartz: Our third quarter results offer further evidence that we continue to grow in very competitive markets with remarkable success and resilience. Revenue for the quarter was 170 million, up 15 percent versus the prior year quarter. We are seeing macro outcome from both increasing handle across products and higher sports hold to largely to our abilities to innovate, which I will get to sort of. We are also growing our revenue much more efficiently as our adjusted marketing spend was 24% lower compared to the same quarter last year.

The majority of which was driven by revenue growth and improving operations.

Given our outperformance during each of the three quarters of this year, we now expect to be adjusted EBITDA positive for the entire year.

Well ahead of our original plans.

We will continue to innovate and leverage our insights to develop and offer our customers differentiated and inexperience as that appeal to them.

Continuing to achieve sustainable growth and profitability.

Our customer centric focus is working well.

Richard Schwartz: The result is we were increasingly profitable on an adjusted EBITDA basis and significantly improves compared to a year ago. Given our out performance during each of the three quarters of this year, we now expect to be adjusted EBITDA positive for the entire year well ahead of our original plans. We will continue to innovate and leverage our insights to develop and offer our customers differentiated and fun experiences that appeal to them while continuing to achieve sustainable growth and profitability.

We maintain market, leading rois driven by.

Industry, leading unit economics.

With growth opportunities via access to future I casino markets in North America, combined with our leading Latin American business and additional opportunities in new markets in the region. We remain excited for what lies ahead.

There are a handful of large population countries in the region legalized or are in the process of legalizing online gaming. So we're glad to be in the right place at the right time.

We continue to see growth across our markets demonstrating that our approach to building a platform business with an unrelenting focus on the player experience is working.

For those of you that track the publicly available state casino Dana the trends are evident.

Richard Schwartz: Our customer centric focus is working. We maintain market leading our lives driven by industry leading unit economics. With growth opportunities, the access to future I casino markets in North America combined with our leading laps in American business and addition opportunities in new markets in the region, we remain excited for what lies ahead. There are a handful of large population countries in the region who have legalized or are in the process of legalizing online gaming, so we're glad to be in the right place at the right time.

While we focus on profitable growth as a priority over market share it's nicely. Despite our marketing spend decreases we've continued to grow market share in a meaningful number of U S markets.

Our quarterly online casino share in the states of New Jersey, and Michigan are higher than anytime over the past year and our online casino share in West Virginia.

Is that the highest level since we launched two five years ago.

We are also seeing similar trends in eight of our online sports markets. This quarter. For example, our shares in the States of Michigan, Virginia, New York, Maryland, and Ohio are all at the highest levels since launch.

Richard Schwartz: We continue to see growth across our markets, demonstrating that our approach to building a platform in business with an unrelenting focus on the player experience is working. For those of you that track the publicly available state casino data, the trends are evident. While we focus on profitable growth as a priority over market share, it's nice to despite our marketing spend decreases. We continue to grow market share in a meaningful number of U.S, markets.

With the first three of those launching roughly two to three years ago.

In addition, our shares in the states of Pennsylvania, and Indiana are the highest they've been in a year and a half.

The annual results.

This quarter.

Is the first time in the company's history.

Richard Schwartz: Our quarterly online casino share in the states of New Jersey and Michigan are higher than any time over the past year, and our online casino share in West Virginia is at the highest level since we launched two and a half years ago. We are also seeing similar trends in eight of our online sports markets this quarter. For example, our shares in the states of Michigan, Virginia, New York, Maryland and Ohio are all at the highest level since launch, with the first three of those launching roughly two to three years ago. In addition, our shares in the states of Pennsylvania and Indiana are the highest they've been in a year and a half.

At our sports book only markets are profitable.

This sets us up well when I casino gets added and supports our plans for long term sustainable profitability.

It is interesting to note that we continue to experience success in very competitive markets markets that were launched in periods of heightened competition with irrational promotional spend as those unsustainable spending levels abate and.

And product and customer experience have begun dictating where people play.

Our which online gaming operator that uses spend the largest share of her wallet with.

We have been increasingly well.

Markets launched after 2020, along with our international markets grew approximately 40% year over year during the quarter.

Richard Schwartz: The end of results, this quarter, is the first time in the company's history that our sports look only markets are profitable. This sets us up well when I casinoots added and supports our plans for long term sustainable profitability. It is interesting to know that we continue to experience success in very competitive markets. Markets are launched in periods of heightened competition with a rational promotional spend as those unsustainable spending levels of base, and product and customer experience have begun dictating where people play, or which online gaming operator that chooses to spend the largest share their wallet with.

Domestically as the U S markets mature we are very pleased with the balance we are achieving our top line growth.

The efficiency of the marketing investment required to maintain that growth and retain customers.

We are seeing improved efficiencies.

Set us up well for 2024 and beyond to grow revenue and further expand profitability.

I will share just a few highlights.

West Virginia continues to be a great story for us, it's a market, where we launched later than our competitors.

And without any starting database are meaningful brand awareness.

But we've been able to build to over 14% market share in casino during the third quarter.

Richard Schwartz: We have been very increasingly well. Markets launched after 2020, along with our international markets grew approximately 40% year-over-year during the quarter. Domestically, as the US markets mature, we are very pleased with the balance we are achieving in our top-line growth and the efficiency of the marketing investment required to maintain that growth and retain customers.

This is our third market, where we've accomplished this in addition to Colombia in Pennsylvania.

In fact, our west Virginia year over year revenue was up over 100% during the quarter and this follows year over year growth of 98% during the second quarter.

In Ontario, we are proud of our performance in a highly competitive market.

Richard Schwartz: We are seeing improved efficiencies that will set us up well for 2024 and beyond to grow revenue and further expand profitability. I'll share just a few highlights. West Virginia continues to be a great story for us. It's a market where we launch later than our competitors and without any starting database are meaningful brand awareness, but we've been able to build to over 14% market share in Icasino during the third quarter. This is our third market where we've accomplished this in addition to Columbia and Pennsylvania.

Year over year growth continues to be very high around 60%.

Our brand and customer experience are resonating well.

As we've seen in the prior quarters from earlier in the year, we are maintaining a significantly higher art MAU versus the competition.

This isn't a market that is roughly three quarters weighted to iqos setup, which plays to our strengths.

In New Jersey, we posted our second highest level of quarterly revenue since launch in 2018.

The results reflect the benefits of our rebranding efforts in those states.

Richard Schwartz: In fact, our West Virginia year-over-year revenue was up over 100% during the quarter and this follows year-over-year growth of 98% during the second quarter. In Ontario, we are proud of our performance in a highly competitive market. Year-over-year growth continues to be very high, around 60%. Our brand and customer experience are resonating well. As we've seen in the prior quarters from earlier in the year, we are retaining its significantly higher art now versus the competition.

The year over year growth in this quarter was the highest level we've achieved since.

Since introducing the <unk> brand in New Jersey last summer.

And our U S online sports with only markets.

We are continuing to see double digit year over year growth.

And market share growth in many of those states, despite coming up against more difficult comparisons in the prior year and reduced marketing by Rsi in those markets.

In Latin America, we continued to perform well with revenue contribution now over 11% of total revenues.

Richard Schwartz: This isn't a market that is roughly three-quarters weighted to Icasino, which plays to our strengths. In New Jersey, we posted our second highest level of quarterly revenue since launch in 2018. As a result, we select the benefits of our rebranding efforts in the state. The year-over-year growth in this quarter was the highest level we've achieved since introducing the bet river's brand in New Jersey last summer. And our U.S, online sports would only market.

In Colombia, we continue to expand at a rapid pace revenue grew 41% compared to last year.

In Mexico, we remain on schedule with our ramp as we started to be more assertive during the quarter of course, we are beginning with a small base very similar to our Colombia looked like several years ago.

Thus the sequential growth this quarter was very high 90% compared to the June quarter.

Richard Schwartz: We are continuing to see double-digit year-over-year growth and market share growth in many of those states. This by coming up against more difficult comparisons in the prior year and reduced marketing by our as high in those markets.

As we've conveyed prior approach in Mexico. It takes the playbook from Colombia.

We're over a several year period, we cultivated a rush bet, Brad by consistently localizing the platform.

And creating a great player experience that consistently improved.

Richard Schwartz: In Latin America, we continue to perform well with revenue contribution now over 11% of total revenues. In Colombia, we continue to expand in a rapid pace. Revenue grew 41% compared to last year. In Mexico, we remain on schedule with our ramp as we started to be more assertive during the quarter. Of course, we're beginning with a small base. Very similar to a Colombia look like several years ago. Thus, the sequential growth as quarter was very high near 90% compared to the June quarter.

As a comparison in Mexico has generated more than two times the revenue of Columbia when measured from launch dates.

Needless to say, we remain bullish on the Mexican opportunity for resi.

Looking ahead at expanding our footprint, we announced some very exciting news in August.

We share with the market and we were selected by the Delaware lottery as their exclusive online provider.

We are targeting to launch by early winter.

For those who are not familiar with Delaware, we will be the sole I gaming and online sports to platform in that state.

Richard Schwartz: As we've conveyed prior, the approach in Mexico takes the playbook from Colombia We're over a several-year period. We cultivated the rush bet brand by consistently localizing the Ford, and creating a great player experience that consistently improves. As a comparison, Mexico generated more than two times the revenue of Colombia when measured from launch date. Needless to say, we remained bullish on the Mexican opportunity for Araceli.

Powering online casino and sports betting for each of the states three casinos.

We're very excited for this opportunity as we see Delaware is a market that plays to our strength.

The results from Delaware's online casinos are publicly available.

As it stands today before we launch we see a market that is doing a little above $13 million annually of GTR.

Over 80% of that is online slot revenues.

Richard Schwartz: Looking ahead, expanding our footprint, we announced some very exciting news in August. We shared with the market that we were selected by Delaware Lottery as their exclusive online provider. We are targeting to launch by early winter. For those that are not familiar with Delaware, we will be the sole eye gaming and online sports platform in the state, powering online casino and sports betting for each of the states three casinos. We are very excited for this opportunity as we see Delaware as a market at plays to our Icasino strengths.

These levels do not include any online sports betting, which has never been offered in this market.

In addition to adding online sports book another change will be how the digital business will be marketed.

Our agreement with a lottery provides for an earmarked digital marketing budget, which is different compared to how the market has operated historically.

We believe this will help us grow the market.

Additionally, when customers log into the apps and sites, we expect them to find a leading online casino experience.

We think we will be able to showcase our ability to deliver a unique and differentiated iqos experience, bringing new functionality and features not previously available to online players in Delaware.

Richard Schwartz: The results from Delaware's online casinos are publicly available. As it stands today, before we launch, we see a market that is doing a little above 13 million annually of GGR, of which over 80% of that is online slot revenue. These levels do not include any online sports betting, which has never been offered in this market. In addition to adding online sportsbook, another change will be how the digital business will be marketed.

We're also planning to bring a wider selection of vendors and a greater variety of content to the market.

Thus when we consider the per capita results of other casino markets.

Combined with how we expect to approach the market. We are very excited to partner with Delaware and grow with Iqos.

Richard Schwartz: Our agreement with the lottery provides for an earmarked digital marketing budget, which is different compared to how the market is operated historically. We believe this will help us grow the market. Additionally, when customers log into the apps and sites, we expect them to find a leading online casino experience. We think we will be able to showcase our ability to deliver a unique and differentiated Icasino experience by bringing new functionality and features not previously available to online players in Delaware.

And online sports book businesses.

We think it can become a meaningful contributor for us both in terms of revenue and adjusted EBITDA.

We will continue to keep the market posted as we launch.

Shifting gears from a legislative standpoint, as we move into 2024, we will begin to see the legislative sessions around the country reconvene.

There are a host of states on our radar that we will be watching closely.

Most recently at center in New York has indicated plans to reintroduce legislation for online casinos in 2024.

Richard Schwartz: We are also planning to bring a wider selection of vendors and a greater variety of content to the market. Thus, when we consider the per capita results of other Icasino markets combined with how we expect to approach the market, we are very excited to partner with Delaware and grow its Icasino and online sportsbook businesses. We think it can become a meaningful contributor for us, both in terms of revenue and adjusted EBITDA.

Additionally, there continues to be activity in additional provinces in Canada, particularly Alberta.

At the same time, we have several jurisdictions. We are following closely in Latin America.

There is no shortage of near and long term opportunities in our universe.

We remain confident over the long term given the potential economics to government budgets, especially as compared to the inflows from online sports betting.

Richard Schwartz: We will continue to keep the market posted as we watch.

That expansion in casino legislation is increasingly a question of when not if.

Richard Schwartz: Shifting gears from a legislative standpoint, as we move into 2024, we will begin to see the legislative sessions around the country reconvene. There are a host of states on our radar that we will be watching closely. Most recently, a center in New York has indicated plans to reintroduce legislation from online casinos in 2024. Additionally, there continues to be activity in additional provinces in Canada, particularly Alberta. At the same time, we have several jurisdictions we are following closely in Latin America.

And our focus on customer engagement and retention, we have made tremendous progress on our product and technology front recently in both I casino and sports betting.

We spent time in the past referencing our unique approach to the online casino player experience, whereby we bill it would be spoke in gaming features on top of the core game library supply to us by third Party game Studios.

Over the past 10 years, we've consistently developed a wide range of casino innovations to offer our players unique ways to play have fun and win when they play with us.

Richard Schwartz: There is no shortage of near and long-term opportunities in our universe. We remain confident over the long term, given the potential economics to government budgets, especially as compared to inflows from online sports betting. That expansion in Icasino legislation is increasingly a question of when, not in. F.

Whether it's our unique to the industry community features for our flagship casino promotional engine.

Our goal has always remained constant.

To increase <unk> retention by offering players fun and unexpected best in class experiences developed in house by our talented product and engineering teams.

Richard Schwartz: In our focus on customer engagement and retention, we have made tremendous progress on the product and technology front, recently in both I casino and sports betting. We spent time in the past referencing our unique approach to the online casino player experience whereby we build bespoke and gamified features on top of the core game library supplied to us by third party games studios. Over the past 10 years, we consistently developed a wide range of casino innovations that offer our players unique ways to play, have fun and win when they play with us.

While our understanding of casino player mindsets and motivations are important so too is our ability to leverage our experience and expertise to develop these new to the world experiences.

Together. This is a big reason why we have and continue to achieve success and.

EMEA online casino vertical.

However, I would also like to point out that.

Strong execution on game integrations and launches also matters for players.

Execution in terms of offering a great breadth and quality of content for our players have a leading selection of content to play and can easily find the gains they prefer to play based on our recommendations.

Richard Schwartz: Whether it's our unique to the industry community features or our flagship casino promotional engine, our goal has always remained constant. To increase our pool retention by offering players fun and unexpected best-in-class experiences developed in-house by our talented product and engineering teams. While our understanding of casino player mindset and motivations are important, so too is our ability to leverage our experience and expertise developed these new to the world experiences. Together, this is a big reason why we have and continue to achieve success in the online casino vertical.

In the third quarter alone.

We launched more than 1000, new slot titles.

We were first to market with many important titles demonstrating.

Demonstrating the seamless way, we work with game providers and their great games quickly.

But in a way that also optimizes, a consistent and fast user experience.

We are the first to market with a differentiated authentic live dealer table games in Michigan, which.

Which is exciting for us as we continue to focus on expanding live to a selection for our customers.

Richard Schwartz: However, I'd also like to point out that strong execution on game integration and launches also matters for players. Execution in terms of offering a great breath and quality of content so our players have a leading selection of content to play and can easily find the games they prefer to play based on our recommendations. In the third quarter alone, we launched more than 1000 new slot titles. We were first to market with many important titles, demonstrating the seamless way we work with game providers, integrate games quickly, but in a way that also optimizes a consistent and fast user experience.

And sports betting we kicked off the football season with the launch of crop central to offer our customers an easy to reach menu to access a wide range of player prop wagering options in a single location.

Historically, the merchandising of popular props betting content with decentralized throughout the App.

A customer has to go through the relevant sports event to access profit.

<unk> central we have entirely changed how we merchandise these popular bets now.

Now there is a central hub for all player perhaps across all major sports and it is presented in an easy to use and uncluttered format.

Richard Schwartz: We are the first to market with the differentiated, authentic live dealer table games in Michigan, which is exciting for us as we continue to focus on expanding live dealer selection for our customers. In sports betting, we kicked off the football season with a launch of Prop Central to offer our customers an easy to reach menu to access a wide range of player props, wagering options in a single location. Historically, the merchandising of popular props betting content was decentralized throughout the app.

The results have been very positive thus far.

With a year over year increase in prop that handle of 87%.

That is not all that we've added to the sports book.

Richard Schwartz: A customer had to go to the relevant sports event to access prop bets. With Prop Central, we have entirely changed how we merchandise these popular bets. Now, there is a central hub for all player props across all major sports and it is presented in an easy to use and uncluttered format. The results have been very positive thus far, with a year-over-year increase in prop bet handle of 87%. That is not all that we've added to the sports book.

We continue to leverage the success of our <unk> spoke squares game.

Starting with the football season, we have made squares available on every NFL game at most college football games.

We are giving customers more chances to win bonuses and achieve profit goes.

We've even added a bad beat mechanics squares to drive increased engagement with sports betters.

We feel really good about where we are positioned.

As <unk> been saying from the beginning in our view product and experience will win the day.

As we continue to successfully retain customers and reactivate customers efficiently.

We continue to expect to deliver profitable growth.

We remain well capitalized as we advance our platform.

Maintain the fiscal and operational discipline to be able to keep growing our profitability over time.

Richard Schwartz: We continue to leverage the success of our bespoke squares game. Starting with a football season, we have made squares available on every NFL game and most college football games. They are giving customers more chances to win bonuses in the chief profits. We've even added a bad beat to the mechanics of the squares to drive increased engagement with force betters.

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

Thanks Richard.

Third quarter revenue was $169 9 million up 15% year over year, once again with well balanced growth across the business. We continue to see strength across the board and I Casino sports in both our U S Canadian and Latam markets, all of which grew double digits during the quarter.

Richard Schwartz: We feel really good about where we are positioned. As you've been saying from the beginning, and our view product and experience will win the day. As we continue to successfully retain customers and reactivate customers efficiently, we continue to expect to deliver profitable growth. We remain well-capitalized as we dance our platform. We maintain the physical and the operational discipline to be able to keep growing our profitability over time.

We posted our second consecutive quarter of positive adjusted EBITDA with a third quarter number coming in at just over $4 million.

As Richard mentioned, we are much improved compared to last year as our adjusted EBITDA for the first nine months of this year is up by over $70 million. We now expect to be adjusted EBITDA positive for the full year 2023.

While we remain true to our approach of allocating more resources to those markets that include a casino. The good news is we've been gaining share in most sports book only markets with a greatly improved product, which positions us extremely well when these markets at a casino.

Kyle Sauers: With that, I'll turn the call over to Kyle. Thanks, Richard. Third quarter revenue was 169.9 million, up 15% year-over-year. Once again, with well-balanced growth across the business, we continue to see strength across the board in Icasino, sports, and both our US Canadian and Latin markets, all of which grew double digits during the quarter. We post our second consecutive quarter of positive adjusted EBITDA with a third quarter number coming in at just over 4 million.

In fact, while we continue to see strong profitability from our casino markets as Richard pointed out. This marks the first quarter were profitable and our sports book only markets when looked at as a whole.

This is a trend we've been talking about in recent quarters and sets us up well going forward.

We continue to see high quality players attracted to our platform and our U S and Canadian art mile of $374 reflects this trend as this is the highest art Mal we've seen in eight quarters up 4% sequentially and 8% year over year.

Kyle Sauers: As Richard mentioned, we're much improved compared to last year, as our adjusted EBITDA for the first nine months of this year is up by over 70 million. We now expect to be adjusted EBITDA positive for the full year 2023. While we remain true to our approach of allocating more resources to those markets that include Icasino, the good news is we have been gaining share in most sports-book-only markets with a greatly improved product which positions us extremely well when these markets add Icasino.

Miles grew 2% year over year, and 4% in markets with Iqos email, all while reducing adjusted marketing spend during the quarter by 24% year over year and 16% sequentially.

Regarding hold I casino was in line with our expected range as Richard mentioned and online Sports book, we're seeing our expected hold percentage move higher due to the innovations, we're making to shift our sports mix to include more parlaying player prospects in terms of percentage of bed count our same game parlays increased by 55% year.

Kyle Sauers: In fact, while we continue to see strong profitability from our Icasino markets, as Richard pointed out, this marks the first quarter we're profitable in our sports-book-only markets, when looked at as a whole. This is a trend we've been talking about in recent quarters, and sets it up well going forward. We continue to see high-quality players attracted to our platform, and our US and Canadian art mile of $374 reflects this trend, as this is the highest art mile we've seen in eight quarters, up 4% sequentially, and 8% year-over-year.

Per year, and the new prop central functionality, Richard talked about helped drive 87% year over year increase in profit handle.

We think these improvements are sustainable and are contributing nicely to the success, we are seeing on the sports side.

Our gross profit increased 20% on the 15% revenue growth the.

Kyle Sauers: Miles grew 2% year-over-year, and 4% in markets with Icasino. All while reducing adjusted marketing spend during the quarter by 24% year-over-year, and 16% sequentially. Regarding hold, Icasino was in line with our expected range. As Richard mentioned, in online sportsbook, we're seeing our expected hold percentage move higher due to the innovations we're making to shift our sports mix to include more parlay and player prop bets. In terms of percentage of bet count, our same game parlay is increased by 55% year-over-year, and the new prop-central functionality Richard talked about helped drive 87% year-over-year increase in prop bet handle.

The result was an improvement in gross margin to nearly 32% compared to 30% during the same quarter last year were well down the road to be able to show meaningful improvement for the full year and our gross margins.

Turning to marketing, we continue to get more efficient with our spend quarterly adjusted advertising and promotion spend was $34 1 million. This was down from $44 7 million last year and down from $40 4 million in the second quarter.

This has been accomplished at the same time, we are increasing market share continuing to grow active user count and getting a larger share of wallet from our players measured by <unk>.

Kyle Sauers: We think these improvements are sustainable, and are contributing nicely to the success we are seeing on the sports side. Our growth profit increased 20% on the 15% revenue growth. The result was an improvement in growth margins to nearly 32% compared to 30% during the same quarter last year. We're well down the road to be able to show meaningful improvement for the full year in our growth margins.

Regarding G&A expense, we were at $15 8 million for the quarter, which was up from $13 9 million in the second quarter.

If you recall last quarter, we had some tailwind from foreign currency during the second quarter and mentioned on our last call that we expected G&A cost to be back near or above Q1 levels in the third quarter.

In the third quarter, we had currency headwinds of roughly $1 million set.

Kyle Sauers: Turning to marketing, we continue to get more efficient with our spend. Quarterly adjusted advertising and promotion spend, the $34.1 million, this was down from $44.7 million last year, and down from $40.4 million in the second quarter. This is being accomplished at the same time we are increasing market share continuing to grow active user count and getting a larger share of wallet from our players measured by our map. Regarding G&A expense, we were at 15.8 million for the quarter which was up from 13.9 million in the second quarter.

Said another way without the effect of currency impacts in Q2 and Q3, our G&A would have been similar for each of Q1 Q2 and Q3 of this year.

We ended the quarter with $171 million in unrestricted cash and no debt the.

Our cash balance increased during the quarter was mostly from improvements in working capital. In addition, during the quarter, we freed up some of our restricted cash to give us more flexibility and allow us to earn interest on these funds.

With our EBIT now turn positive.

Kyle Sauers: If you recall, last quarter we had some tailwinds from foreign currency during the second quarter and mentioned on our last call that we expected G&A costs to be back near or above Q1 levels in the third quarter. In the third quarter we had currency headwinds of roughly 1 million. Set another way, without the effect of currency impacts in Q2 and Q3, our G&A would have been similar for each of Q1, Q2 and Q3 of this year.

We're comfortably more than fully funded to reach cash flow positive.

We are tightening and raising our guidance for the full year.

We now expect full year revenue to be between $665 million and $685 million, which increases the midpoint to $675 million up $5 million from our previous guidance.

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

As a reminder, if you'd like to ask a question you can press star followed by one that Nathan Thank you Pat.

Kyle Sauers: We ended the quarter with 171 million in unrestricted cash and no debt. The cash balance increase during the quarter was mostly from improvements in working capital. In addition, during the quarter we freed up some of our restricted cash to give us more flexibility and allow us to earn interest on these funds. With our EBITDA now turn positive, we are comfortably more than fully funded to reach cash flow positive.

Thank you for your question you May press Star two.

Please ensure your unmentioned nicely when asking your question.

Our first question for today comes from Jordan Bender of JMP Securities Jordan. Your line is now open. Please go ahead.

Great. Thanks for taking my question I'll actually start with my follow up call you just kind of reference.

Our guidance range for 'twenty, three moving up at the mid point.

Kyle Sauers: We are tightening and raising our guidance for the full year. We now expect full year revenue to be between 665 million and 685 million which increases the midpoint to 675 million up 5 million from our previous guidance.

Okay.

I think we lost Jordan there, we still live on the call.

Jordan you might need to just sounds lately.

Unknown Attendee: And with that operator, please open the lines for questions. Thank you. As a reminder, if you'd like to ask a question, you can press star, followed by one on the telephone keypad. If you'd like to remove your question, you may press star, followed by two. Please ensure you're unmuted locally when asking your question.

Yes, sorry can you guys hear me.

We can hear you now.

Sorry, you mentioned the guidance went up.

For the year can you just kind of talk about where our competition falls into that number when thinking about maybe the top end or the either a de novo Ryan give that range just given some of that incoming competition coming up here.

Jordan Bender: Our first question for stay comes from a Jordan Bender of JMP Securities. Jordan, your line is now open, please go ahead. Great, thanks for taking my question.

Sure I'll take that one I think it's a factor, but theres a lot of different factors when we think about.

Kyle Sauers: I'll actually start with my follow-up call. You just kind of reference the guidance range for 23 moving up at the midpoint. I think we lost Jordan there. We still live on the call. Jordan, you might have me to just south locally. Yep, sorry. Can you guys hear me? I can hear you now. Oh, there we go. Sorry. You mentioned the guidance went up at the midpoint for the year. Can you just kind of talk about where a competition falls into that number when thinking about maybe the top end or the either the little range of that range, just giving some of that incoming competition coming up here?

About defining the revenue range now you've got particularly in Q4 for US sports hold is a bigger impact.

We've got some markets that are growing faster than others. So we have to think about the variability there.

Potential currency impacts and then we still have the anticipated.

Upcoming exit from Connecticut that we've got built in some variability around that so competition's a piece of it but it's one of one of many factors.

Okay. Thanks.

And then in September you guys are included in this it seems like promotions stepped up on at same store basis from the prior year now obviously with the NFL coming in Thats, that's expected but.

Kyle Sauers: Sure, I'll take that one. I think it's a factor, but there's a lot of different factors when we think about, about defining the revenue range. You've got particularly Q4 for us. Sports hold is a bigger impact. We've got some markets that are growing faster than others, so we have to think about the variability there. We've potential currency impacts, and then we still have the anticipated upcoming exit from Connecticut that we've got built in some variability around that. So, competitions are a piece of it, but it's one of many factors.

The drive up higher are we seeing a little bit more of a promotional environment out there and then does that also translate into the gaming side of the business as well. Thank you.

Yes. Thanks for the question Jordan I think maybe to start with.

The bonus and the strategy is going to look different in different markets, depending on the opportunity for us in that market, maybe what the competitive landscape looks like in that market, even the taxability of bonuses. So I think we just need to understand that.

Extrapolating out from one or a few markets when youre looking at bonus and doesn't necessarily apply to every market.

Kyle Sauers: Okay, thanks. And then in September, you guys are included in this. It seems like promotion stepped up on the same store basis from the prior year, obviously with the NFL coming in that's expected. But the drive up higher, are we seeing a little bit more of a promotional environment out there? And then does that also translate into the eye gaming side of the business as well? Thank you. Yeah, thanks for the question, Jordan.

I will point out that we were particularly low.

Last year in Q3, so from a year over year perspective, it does look higher.

We have been about where we.

Where we have been on the sports side for the last several quarters. So it wasn't a big sequential change for us.

And I think the the landscape of bonus seen we will continue to be dynamic and change for us and probably for for all players depending on how markets are maturing and how youre thinking about spending on external marketing spend versus bonus scene for retention and reactivation.

Kyle Sauers: I think maybe to start with just the bonicing strategy, it's going to look different in different markets depending on the opportunity for us in that market, maybe what the competitive landscape looks like in that market, even the taxability of of bonicing. So I think it's, we just need to understand that extrapolating out from one or a few markets, when you're looking at bonicing doesn't necessarily apply to every market. I will point out that we were particularly low last year in Q3.

And then the last piece of your question about I Casino Thats been relatively flat for US I think it was actually down year over year in terms of percentage of bonus and relative to <unk> in the third quarter. So no no major shifts there and you can imagine that's a much.

Kyle Sauers: So from a year of a year perspective, it does look higher, but we have been about where we have been on the sports side for the last several quarters, so it wasn't a big sequential change for us. And I think the landscape of bonicing will continue to be dynamic and change for us and probably for all players, depending on how markets are maturing and how you're thinking about spending on external marketing spend versus bonicing for retention and reactivations.

Bigger impact on the overall business for us given given that were.

Three quarters ish.

Hi casino versus sports.

Great nice quarter.

Thanks Jordan.

Thank you. Our next question comes from David Katz of Jefferies.

David Your line is now open. Please go ahead.

Afternoon, Thanks for taking my questions.

Sure.

Kyle Sauers: And then to the last piece of your question about Icasino, that's been relatively flat for us. I think it was actually down year over year in terms of percentage of bonicing relative to GGR in the third quarter. So no major shifts there, and you can imagine that's a much bigger impact on the overall business for us given that we're, you know, three quarters-ish. Icasino versus sports.

Delaware opportunity it sounds like.

Pretty exciting one.

Can you just talk about the scale and scope of how we might think about that.

Relative to the size of your business or any sort of color you can put around its magnitude would be helpful.

Why don't you take that one I think.

Hi, David I should talk to you.

We're excited by the market, but I think in terms of the actual impact finance that and turn it over to the cloud I mentioned, yes, So obviously hasn't launched yet not.

Jordan Bender: Great. Nice quarter. Thanks, Jordan.

Unknown Attendee: Thank you.

Not included in any guidance will will certainly.

Assess how thats going when we get to our our Q4 call.

David Katz: Our next question comes from David Katz of Jeffries. David, your lines are open. Please go ahead. Afternoon. Thanks for taking my questions. The Delaware opportunity sounds like a pretty exciting one.

Have more color at that point, but we are really excited about it for the reasons Richard mentioned.

Very confident about the product and how it is going to be received by players in that state.

As Richard mentioned, there is some marketing dollars that are going to be put to work and thats new there.

Kyle Sauers: Can you just talk about the scale and scope of how we might think about that relative to the size of your business or any sort of color you can put around its magnitude would be helpful. Kyle, why don't you take that one? I think with the high David, I should talk to you. We're excited about the market, but I think in terms of the actual impact financially, I think we'll turn over to Kyle to mention.

The market is pretty small right now, but over time, we think there is a pretty pretty nice opportunity to expand.

It's not going to happen overnight, but if you maybe just relative data points. If you just compare Delaware to our other live markets in the U S New Jersey.

Pennsylvania, Michigan, West, Virginia, and you're just match up adult population income levels, you could argue that Delaware is as only 110th the size.

Kyle Sauers: Yeah, so obviously I haven't launched yet, not included in any guidance will certainly assess how that's going when we get to our Q4 call and have more color at that point. But we are really excited about it for the reasons Richard mentioned. Very confident about the product and how it's going to be received by players in that state. As Richard mentioned, there's some marketing dollars that are going to put to work and that's new there.

Relative to those other states as it should be over time. So again, it's kind of it will take some time, but we think it's a really great opportunity.

Just to follow up there.

Is it something we should be thinking about.

<unk>.

As negative profitability initially or do you have enough scale at this point, where you can sort of operate.

Neutral.

And build over time.

Kyle Sauers: The market's pretty small right now, but over time we think there's a pretty pretty nice opportunity to expand. It's not going to happen overnight, but if you maybe just relative data points, if you just compare Delaware to our other live markets in the US New Jersey, Pennsylvania, Michigan, West Virginia, and you just match up adult population income levels, you could argue that Delaware is only one tenth the size relative to those other states is it should be over time. So again, it'll take some time, but we think it's a really great opportunity.

So I would not think about it as some big headwind in 2024.

Like like most markets.

Next a little while to get up and running there are some costs associated with that but like other north American casino markets that we've demonstrated Delaware it should get profitable pretty quickly.

It's going to take some time to grow but I think just maybe thinking about the the economic profile gross margins in Delaware for us should should reach kind of near our company average and the contribution margin should likely be a higher over time, because theres not not going to be the same marketing intensity that you would.

Kyle Sauers: Just to follow up there, is it something we should be thinking about as negative profitability initially or do you have enough scale at this point where you can sort of operate neutral and build over time? So I would not think about it as some big headwind in 2024. Like most markets, it takes a little while to get up and running, there's some costs associated with that. But like other North American casino markets that we've demonstrated, Delaware, it should get profitable pretty quickly.

Have.

And a single operator.

Operator market.

Got it okay. Thank you very much.

Yes.

Thank you our.

Our next question comes from Chad Beynon from Macquarie.

It is now open. Please go ahead.

Afternoon nice quarter, Thanks for taking my question.

Wanted to ask about flow through our margins.

Last two quarters, you've grown revenue about $20 million year over year.

Kyle Sauers: It's going to take some time to grow. But I think just maybe thinking about the economic profile, gross margins in Delaware for us should reach kind of near our company average and the contribution margin should likely be a higher over time because there's not going to be the same marketing intensity that you'd have in a single operator market. Got it.

David Katz: Okay, thank you very much. Thank you.

And EBITDA has increased between 15 and $20 million during those quarters, respectively year over year, so flow through in the 75% to 100% in the fourth quarter based on your guidance and Richard based on your commentary that.

The year should be profitable that would kind of infer that flow through will actually be higher than 100%.

So first question on that and then more importantly, as we think about 2024. If there is no new state launches how should we think about flow through given the leverage that you're getting on the current marketing spend.

Chad Beynon: Our next question comes from Chad Bainman from McQuarrie. Chad, do you want to open the please go ahead. Afternoon. Nice quarter. Thanks for taking my question. Wanted to ask about flow through or margins. The last two quarters you've grown revenue about 20 million year over year and EBITDA has increased between 15 and 20 million during those quarters respectively year over year. So flow through in the 75 to 100% in the fourth quarter based on your guidance and Richard based on your commentary that the year should be profitable.

The fixed costs. Thanks.

Yes, I'll take that one Chad. Thanks for the question I think on the flow through here in the near term.

Probably getting too precise to pick a pick a percentage there is theres a lot of moving parts here even things.

As simple as.

The currency fluctuation that I mentioned that was a $1 million.

Pick up for us in Q2 and $1 million headwind in Q3.

Chad Beynon: That would kind of infer that flow through will actually be higher than 100%. So first question on that. And then more importantly is we think about 2024. If there's no new state launches, how should we think about flow through given the leverage that you're getting on the current marketing spend and the the fixed costs. Thanks. Yeah, I'll take that one Chad. Thanks for the question. I think I'm on the flow through here in the in the near term.

At these levels with us.

These are single digit profitability it starts to have but even things like that start to have a meaningful impact when we get into next year I think the way I think about it is we expect to continue to grow obviously this is a growth market.

We're a growth business and that's independent of of new market launches.

Markets are maturing, we'd expect to get leverage over our marketing spend.

Chad Beynon: It's probably getting too precise to pick a pick a percentage. There's a lot of moving parts here. You know, even things as simple as the currency fluctuation that I mentioned that was a million dollar pickup for us in Q2 and a million dollar headwind in Q3. At these levels with this these single digit profitability. It starts to have the even things like that start to have a meaningful impact. When we get in the next year, I think the way I think about it is we expect to continue to grow.

Our gross margins should be able to improve in 2024 versus 2023 is.

As those markets grow we've got some fixed expenses, our revenue mix should come from higher profitability States.

And G&A I think.

If you look at the way we've spent this year and really the way we spent since since we've.

Gone public as a company, we've been pretty modest with the way we've built the infrastructure of the business. So we may or may not get leverage over G&A next year, but it's not going to be a big drag for us.

Chad Beynon: Obviously this is a growth market. We're a growth business and that's independent of new market launches. Markets are maturing. We'd expect to get leverage over our marketing spend. Our gross margins should be able to improve in 2024 versus 2023 as is. As those markets grow, we've got some fixed expenses. Our revenue mix should come from higher profitability states. And GNA, I think if you look at the way we spent this year, and really the way we spent since we've gone public as a company, we've been pretty modest with the way we've built the infrastructure of the business.

Thanks, Kyle and then.

Given that <unk> been able to achieve profitability in some.

Probably more sports only states than we originally thought does that change how you're thinking about getting into some sports only markets.

Where you have you have a license you have a wait and but haven't launched at this point. Thanks.

I'll take that one I think every market. We continue to look at it on a case by case basis looking at all the things like the tax rate's likelihood I casino being added et cetera sure. It gives us some confidence to know that we are able to achieve this profitability and achieve better results in the sports it only markets, but we still are going to be looking at each one on a case by case basis.

Monitor the opportunities in each case, and so we are being selective and I think we're making some really good decisions on which markets to enter.

Chad Beynon: So we may or may not get leverage over GNA next year, but it's not going to be a big drag for us. Thanks, Kyle. And then, given that you've been able to achieve profitability in some, probably more sports only states than we originally thought, does that change how you're thinking about getting into some sports only markets where you have, you have a license, you have a way in but haven't launched to this point.

It was not too and we continue to evaluate them on a case by case basis.

Great. Thanks, Richard I appreciate it guys.

Thanks, Ken.

Thank you. Our next question comes from Dan <unk>.

Wells Fargo.

Your line is now open. Please go ahead.

Hey, good afternoon, everyone. Thanks for all the detailed commentary.

First question.

Chad Beynon: Thanks. Yeah, I'll take that one. You know, I think every market we continue to look at on a case by case basis, looking at all the things like the tax rates, the likelihood of like, you know, being added, et cetera, it sure gives us some confidence to know that we are able to achieve this profitability and achieve better results than the sports that only markets. But we still are going to be looking at each one on a case by case basis and monitor the opportunities in each case.

Sounds like you guys are gaining a lot of momentum and share.

One I wanted to just clarify when you're talking about gaining gaining shares gross revenue net revenue handle yes. If you could just clarify there and then what do you attribute this to.

Product the change in the competitive environment and how do you see that share level evolving from here as it relates to the competitive environment may be changing in the next few months.

Chad Beynon: And so we are being selective, and I think we're making some really good decisions on which markets enter and which ones not to. And we continue to evaluate them on a case by case basis. Great. Thanks, Richard. Appreciate it, guys. Thanks, guys. Thank you.

Yes, sure Dan I'll, just take the first part on the.

Clarifying it's a good it's a good point so we're looking at <unk>, when we were giving some of those share changes.

Dan Politzer: Our next question comes from Dan Pulitzer of Wells Fargo. Your line is now open. Please go ahead. Hey, good afternoon, everyone. Thanks for all the detailed commentary. The first question, you know, it sounds like you guys are gaining a lot of momentum and share.

You don't have that in all markets.

<unk> you do.

So we felt like that the best way to best way to look at that.

Hey, Dan on the second question.

Richard Schwartz: One, I wanted to just clarify, when you talk about gaining shares, it's gross revenue, net revenue, handle, yeah, if you can just clarify there. And then what do you attribute this to is the product that changes the competitive environment, and how do you see, you know, that share level evolving from here as it relates to, you know, the competitive environment, maybe, you know, changing in the next few months. Yeah, sure, Dan.

Sure isn't really something that is not our primary motivation for us we're trying to get to the profitability in every market and get a quick return on invested capital, but it is nice we are able to reduce marketing spend can still grow share in a time when it's still in a very competitive marketplace, which I think it does validate the quality of improvements we've been talking about on the product side, we just in fact.

Todd Eilers report for those of you follow it just came out today on the sports book side, and we moved up a couple of spots I think four out of 36 products in terms of the quality of the sports book side. So I think that's a great example of when you combine the products with the quality of the customer service we offer in automating a bunch of features that allow us to service customers.

Richard Schwartz: I'll just take the first part on clarifying it. It's a good, it's a good point. So we're looking at GGR when we're giving some of those share changes. You don't have net in all markets. GGR, you do. So so we felt like that's the best way to, best way to look at that. Hey, Dan, on the second question, you know, share is it really something with, it's not a primary motivation for us.

With reduced friction it does create a win win for the players in us and I think so we do feel that our quality of our experience continues to improve and as we bring some innovation to the market, which.

Noted in the past we started by doing casino innovation and we've now just sort of starting to relieve some of our sports book capabilities add New Sports book features are working and players really notice when you're offering something that's unique and differentiated and high quality and you start to get some momentum from those differ.

Richard Schwartz: We're trying to get to the profitability of every market, get a quick return on invested capital. But it is nice. We are able to reduce marketing spend and still grow share in a time when it's still in a very competitive marketplace, which I think does validate the quality and improvements we've been talking about on the product side. We just in fact saw it, either as a report for those of you who follow it, just came out today on the sports book side and we moved up a couple of spots.

Differentiation features that we're bringing into market. So thats sort of the answer to your question.

Richard Schwartz: I think to four out of 36 products in terms of the quality of the sports book side. So I think that's a great example of when you combine the products with the quality of the customer service we offer and automating a bunch of features that allow us to service customers with reduced friction. It does create a win-win for the players at us. And I think so we do feel that our quality of our experience continues to improve.

Got it thanks, and just for my follow up.

I know you mentioned that there was a lot of you turn profitable overall for sports betting only markets, obviously thats not all markets I guess could you can you unpack that a little bit and let us know maybe what are some of the leaders versus laggards, there and among those latter laggards do you see a path to becoming EBITDA positive in those markets over time.

Sure, Yes, I'll take it.

Richard Schwartz: And as we bring some innovations to the market, which as I've noted in the past, we started by doing casino innovation and now the sort of started to release release some of our sports book capabilities and the sports book features are working. And players really notice when you offer them something that's unique and differentiated and with high quality and you start to get some momentum from those differentiation features that we're bringing into market. So that's sort of the answer to your question. David, thanks.

I think the.

And I'm not going to give specifics on each each market and start to break down profitability exactly by market, but I think if you look at the.

The markets, where we have had stronger revenue bigger share.

And if you had a matrix of share and revenue.

With tax rates.

It's probably going to lead you to a pretty good answer on which ones are most likely to be profitable and then in terms of profitability over time as sports book only markets. We do believe that all of them can get there some of them are going to be a little more challenging as you can imagine New York would be at the top of that list, but we have made.

Richard Schwartz: Just for my follow-up, you know, I know you mentioned that there was a lot of, you know, you turned profitable overall for sports betting, only markets. Obviously, that's not all markets. Can you unpack that a little bit and let us know maybe what are some of the leaders versus lagers there? And among those lagers, you see a path to becoming, you know, even the positive in those markets over time. Sure, yeah, I'll take it.

Significant improvements in New York as well.

They can all get there, but over varying amounts of time.

Got it thanks for the color and nice quarter.

Richard Schwartz: I think the, I'm not going to give specific on each market and start to break down profitability exactly by market. But I think if you look at the markets where we have a stronger revenue, bigger share, and if you had a matrix of share and revenue with tax rates, that's probably going to lead you to a pretty good answer on which ones are most likely to be profitable. And then in terms of profitability over time as sportsbook only markets, we do believe that all of them can get there.

Thanks.

Thank you.

Next question comes from Jed Kelly of Oppenheimer.

Line is now open. Please go ahead.

Great.

Circling back to some of the success Youre having in OSB.

That's coming more from the product or is that coming from smarter bonus thing Youre doing and then.

I might have joined a little late but.

I'm getting the Delaware contract can you share with us any churn any anything in terms of like licensing or taxes or revenue share we should be aware of it world as we're thinking about building that into our 2024 model. Thank you.

Richard Schwartz: Some of them are going to be a little more challenging as you can imagine New York would be at the top of that list, but we've made significant improvements in New York as well. So I think they can all get there, but over varying amounts of time.

Hey, Jed, it's Richard I'll take the first question.

Carl to answer the second one.

Dan Politzer: Alright, thanks for the color in nice quarter. Thank you.

As I referenced earlier I think the product improvements on the sports. We're excited very meaningful we've been talking about for several quarters last year, how much better the products getting and it is really delivering.

Jed Kelly: Our next question comes from Jed Kelly of Oppenheimer. Go line it's out open. Please go ahead. Great. I'm just circling back to some of the success you're having in OSB. You think that's coming more from the product or is that coming from smarter, bonus thing you're doing? And then, you know, I might have joined a little late, but I'm getting the Delaware contract. Can you share with us any terms, anything in terms of like licensing or taxes or revenue share we should be aware of it. Whereup has were thinking about building that into our 2024 model. Thank you.

A much better experience for the users and we've been able to bring some unique features to the market. We have the squares feature which players where we talk about when and where they get to.

To make the same bandwidth with any app on the same sort of spread that with any competitor, including us, but when they bet with us they get an extra chance to win a no extra cost up to $10000 through a lottery mechanics square lands. So just giving players something fund something unexpected something different.

As a capability that really helps to drive some users. We've also made a lot of improvements in the.

And the way we market our props.

Richard Schwartz: Hey, Jed, it's Richard. I'll take the first question and Kyle can answer the second one. As I referenced a little bit earlier, I think that's the product improvements on the sportsroom side are very meaningful. We've been talking about it for several quarters. The last year, how much better the product is getting and it's really delivering a much better experience for the users and we've been able to bring some unique features to the market.

Central was referenced earlier in my notes really is having a meaningful impact on mix on exposing really important that the people are looking for in a much easier way. So when you combine that with customer service and all of the automation, we do in the customer service team. It makes a big difference and players are noticing and I think another big factor is that as other.

Richard Schwartz: We have the squares feature, which players will talk about winning where they get it. They make the same bet with any app on the same sort of spread that with any competitor, including us. But when they bet with us, they get an extra chance to win and no extra cost up to $10,000 through a lottery mechanic if they're square lands. But just giving players something fun, something unexpected, something different is a capability that really helps the drive some users.

Promotions come down in the industry and ours and others are more similar you start to have lesser of a difference between the bonuses and youre not having every operator bonus if theres an injury ankle turned in the first quarter. They get back the money to players who are not seeing that type of aggressive bonuses anymore, and I think thats, helping to sort of have players be more discernible.

About what experience they want and choosing the <unk>.

Richard Schwartz: We've also made a lot of improvements in the way we market our props. The prop sensual was referenced earlier in my notes. Really is having a meaningful impact on exposing really important bats that people are looking for in a much easier way. So when you combine that with customer service and all the automation we do in the customer service team, it makes a big difference. And players are noticing, and I think another big factor is that as other promotions come down in the industry and ours and others are more similar, you start to have lesser of a difference between the balancing.

Operators to offer them, a trustworthy reliable and high quality experience, which is what we offer is I think we're continuing to gain momentum on the quality of our experience less about being transactional base are offering more aggressive bonuses, which is how it used to operate.

And real quick I know, we covered some of the Delaware, but just the highlights today, it's about a $13 million annual run rate G Jr.

So it's going to take some time to build from there. We think there's a lot of great things, we bring to the table that are going to be able to make that a bigger market than it is.

Richard Schwartz: And you're not having every operator bonus if there's an injury, you know, an ankle turn in the first quarter, they get back to the players. You're not seeing a type of aggressive bonus thing anymore. And I think it's helping to sort of have players be more discernible about what experience they want and choosing the operators to offer them a trustworthy, reliable and high quality experience, which is what we offer. So I think we're continuing to gain momentum on the quality of our experience, less about being transactional based or offering more aggressive bonuses, which is how it used to be.

But we want to be mindful of that.

It's a new launch for us and it will take some time to build we do think it won't it.

It won't be a big headwind for us in terms of profitability. We can we can get profitable they are fairly quickly it.

It should have gross margins that are in.

The company average range that we have today and then contribution margins for that market should be should be higher as we.

As we get to profitability.

Great and then just just one quick follow up.

Kyle Sauers: And real quick, Chad, we've covered some of the Delaware, but just thought the highlights, you know, today it's about a $13 million annual run rate GGR. So it's going to take some time to build from there. We think there's a lot of great things we bring to the table that are going to be able to make that a bigger market than it is. But we want to be mindful that it's a new launch for us and it'll take some time to build.

How much have October holds factored into your <unk> guidance. Thanks.

Sure. So so certainly we take take the hope we know about today.

Revenue generation that we have to date, but.

It's going to fluctuate from from week to week as you can imagine.

So it is factored in for sure and we've got a range of factors for the remainder of the <unk>.

Kyle Sauers: We do think it won't be a big headwind for us in terms of profitability. We can we can get profitable there fairly quickly. It should have gross margins that are in kind of the company average range that we have today. And then contribution margins for that market should be should be higher as we as we get to profitability.

November and December as well.

Thank you.

Thank you.

Our next question comes from Joe <unk> of Susquehanna.

Your line is now open. Please go ahead.

Thank you.

Hey, Richard Kyle I had a couple of questions on user growth. Please.

Kyle Sauers: Great. And then just just one quick follow up. How much have a October holds factored into your four to guidance. Thanks. Sure. So certainly we take take the hold we know about today and the revenue generation that we have today, but that's going to fluctuate from from week to week as you can imagine. So it's it is factored in for sure. And we've got a range of factors for the remainder of the November and December as well. Thank you.

And I'm just trying to understand kind of just the level of penetration say in some of your older markets I casino markets in particular, whether it be Pennsylvania, and so forth and how much.

More opportunity you think there is regarding user growth I think you gave a stat.

On slide.

16.

You said.

Miles were up 4% and casino market.

Every year, but I was curious if I am.

Assume thats, both products and if I exclude <unk>.

George.

Wondering if if youre users were up.

Joe Stauff: Our next question comes from Joe spouse of the squihana Joe. Your line is now open. Please go ahead. Thank you. Hey Richard Kyle. I had a couple questions on user growth. Please. And I'm just trying to understand kind of just the level of penetration say and in some of your older markets, I casino markets in particular whether it be Pennsylvania and so forth and how much. More opportunity you think there is regarding user growth.

Kind of year over year, specifically for casino.

Yes, so maybe I'll take the the.

The first part and let Mike.

Richard talk about.

The markets in general and in growth growth opportunity in those more mature markets.

Richard said some of this but we've definitely been focused on acquiring and retaining high quality players.

In total.

You mentioned for U S and Canadian markets miles were up 4% year over year in total and we say that casino markets. You are correct that is that people who are in those markets they might be playing casino only sports only or both.

Joe Stauff: I think you gave a stat on slide 16 where you said, you know, miles were up 4% in I casino markets. Year every year, but I was curious if I assume that's both products and if I exclude sports wondering if your users were up. You know, kind of year every year, specifically for I casino.

And then in markets.

All markets in total we were up 2% on the quarter. So we had about 132000.

Monthly active users in the quarter.

Kyle Sauers: Yeah, so maybe I'll take the first part and let Richard talk about, you know, the markets in general and growth, growth opportunity in those more mature markets. You know, Richard said some of this, but we've definitely been focused on acquiring and retaining high quality players in total. As you mentioned for US and Canadian markets, miles were up 4% year over year in total. And we say I casino markets year correct that is that's people who are in those markets.

And in terms of the opportunity in a market like Pennsylvania too to grow our users. So we certainly think there is an opportunity as we continue to work close with.

Lambaste partner, there, we're continuing to find ways to collaborate cross sell we've integrated the platform systems together in a way that allows us to reward loyalty points, whether that plagued us from land based online of the play online going back to land base in a way that we think is going to start to contribute to some opportunities to convert some more players from land based to playing both.

Online land based knowing that if you do that you achieve a greater loyalty loop among those players. So there are certainly things that we're working on I don't think I've ever worked with.

Kyle Sauers: They might be playing casino only sports only or both. And then in markets or in all markets in total, we were up 2% on the quarter. So we had about 132,000 monthly active users in the quarter. In terms of the opportunity to market like fence of India to grow our users, we certainly think there's an opportunity as we continue to work close with a land based partner there. We continue to find ways to collaborate cross sell.

Well and close as we are these days with the land based property and so we're continuing to have a lot of opportunity to to show some results from that collaboration.

And just to clarify.

Again, sorry.

4%.

Any way you can give us a look you don't have to give the exact number but if I were to exclude.

Sports based customers just curious again, if if I casino users had grown year over year and third quarter.

Kyle Sauers: We've integrated the platform systems together in a way that allows us to award loyalty points, whether the player goes from land based to online or the player online going back to land based in a way that we think is going to start to contribute to some opportunities to convert some more players from land based to playing both online land based knowing that you do that you achieve a greater loyalty loop among those players. So there's certainly things that we're working on.

Yes, I think breaking it down that far as further them then we would expect to do.

On a call like this but.

Up 4% in those markets.

We're having great success and a casino Richard talked about market share in those markets, we're growing growing in those markets.

Kyle Sauers: I don't think we ever work as well and close as we are these days with land based property. And so we're continuing to have a lot of opportunity to show some results from that collaboration. And just to clarify, you know, again, sir, you know, in that 4%, there's any way you can give us a look, you don't have to give the exact number, but if I were to exclude sports based customers, I just curious again, if I could, you know, users had grown year, year and third quarter.

I think we're real pleased with the way the user count has been trending there.

Okay and then.

If I could just to follow up real quick ones.

What is the timing on Connecticut exit and.

Are you interested in possibly.

I don't know.

Selling sub leasing whatever the right terminology is on your New York market access.

On the Connecticut announcements, there's been no public announcement of the times. There's nothing further we are able to comment on.

Kyle Sauers: Yeah, I think breaking it down that far is further than we'd expect to do on a call like this, but, you know, up 4% in those markets, I think we're having great success. And I could see no, Richard talked about market share in those markets, we're growing, growing in those markets. So I think we're real pleased with the way the user counts been trending there.

And what we've talked about previously where we thought.

At the end of this year would be the timeline that we're operating within.

In terms of New York is not does not.

I believe right now to consider sign that asset its certainly something Thats limited scarcity as the largest online sports betting market in the country and we are obviously excited about the opportunity to potentially leverage that license framework to help secure gaming potentially so for us, it's very strategic to be able to have that asset.

Richard Schwartz: Okay, and then if I could just to follow up real quick ones, what is the timing on Connecticut exit and are you interested in possibly, I don't know what, selling, sub leasing, whatever the right terminology is on your New York market access? On the Connecticut announcement, there's been no public announcement of the times, there's nothing further we're able to comment on beyond what we talked about previously, where we thought, you know, by the end of this year would be the timeline that we're operating with it.

Thanks Scott.

Thank you. Our next question comes from Ryan Macdonald from Craig Hallum.

Your line is now open. Please go ahead.

Good afternoon. This is will on for Brian. Thanks for taking our question maybe just a few quick ones for me first one I wanted to talk about was.

You did a partnership with genius sports for that vision or sort of watch embedded service I think your peers are currently running at <unk> I was curious.

Richard Schwartz: In terms of New York, there's not a belief right now to consider selling that asset. It's certainly something of limited scarcity is a large online sports study market in the country. And we're obviously excited about the opportunity to potentially leverage that license framework to help secure eye gaming potentially. So for us, it's very strategic to be able to have that asset. Thanks a lot. Thank you.

Maybe.

A timeline for when you guys might plan to deploy that and just any comments you might have on testing your experience with it.

Sure, Hey, Welles Richard Yes.

We have so it was only three or so other operators and us that are using it we actually have already deployed it.

So we're not really speaking about.

Any data results from this at this point so very early times in very early days on it but certainly we think the ability to offer streaming of content is helpful. Especially if you can offer some bets alongside of that experience. So we're testing analysis.

Ryan Sigdahl: Our next question comes from Ryan Fickdal from Pray Kalem. You're on the snow open. Please go ahead.

Richard Schwartz: Good afternoon. This is Will on for Ryan. Thanks for taking our questions. Maybe just a few quick ones for me. The first one I wanted to talk about was you did a partnership with genius sports for bet vision. There's sort of watching bet service. I think your peers are currently running it. I was curious. Maybe a timeline for when you guys might plan to deploy that and just any comments you might have on testing or experience with it.

Well it works and if we can get some.

Increased betting volume based on having something that's relatively unique in this space.

Great and then maybe as a follow up to that I wanted to hop ton Carryall.

Last call I think you guys said your art MAU compared to competitors was double that.

Just curious maybe how has that changed during the quarter and any other comments on the Ontario market.

Richard Schwartz: Sure. Hey, well, Richard. Yeah. We've got is what we have for only three or so other operators and us that are using it. We actually have already deployed it. And so we're not really speaking about the any any data results from this at this point, but very early times and very early days on it. But certainly we think the ability to offer streaming of content is helpful, especially if you can offer some bets. Alongside that experience. So we're testing it out, seeing how how well it works. And if we can get some increase and increase vetting volume based on having something that's relatively neat in this in the space.

Yes, <unk> continues to be really strong there.

I actually don't know offhand.

If it's exactly still double or more than double.

But it stayed very strong so I presume others.

Look similar.

I don't think there's any change there.

I think it's been consistent in terms of high performance and getting a higher share of wallet, which is ultimately what matters. Most of those markets as player is going to play multiple sites, but how much of that budget are they going to allocate towards better experiences science, who prefer and I would think the reflection of the high ARPA arent MAU is an indication that they really prefer may in many cases.

Richard Schwartz: Great. And maybe the follow up to that. I wanted to hop to Ontario last call. I think you guys said your art mile compared to competitors was double that. Just curious maybe how's that changed during the quarter and any other comments on the Ontario market. Yeah, our mouth continues to be really strong there. I actually don't know offhand if it's exactly still double or more than double, but it stayed very strong, so I presume others have looked similar, so I don't think there's any change there.

To play with us in terms of the market itself.

It grew to maturity in terms of the conversion from black market or gray market too to white market very fast.

It's at the point now where all of the all the existing prior operators have converted their player basis, rather play now where youre going to start to see over time I think the quality operators will start to stand out more from the pack right. Because now you have a situation where everyone's convert and everyone's now on an equal playing field and ultimately we're excited about that market opportunity because we do think the experience we offer is unique and.

Richard Schwartz: I think it's been consistent in terms of high performers and getting a higher share of wallet, which is ultimately what matters most in those markets is, the players are going to play multiple sites, but how much of the budget are they going to allocate towards the better experiences and the sites they prefer, and we think the reflection of the high art now is an indication that they really prefer many cases to play with us. In terms of the market itself, it's agree to maturity in terms of the conversion from black market or gray market to white market very fast, but at the point now we're all the existing prior operators if you've heard of their player basis.

And when players try us they stay with us and so our goal is to get a larger number of players.

Previously familiar with our brand to give us a try with the recognition that when they do we have a pretty good shot at keeping them.

Well I just took a peek in.

Without giving you exact number.

Our our MAU has grown sequentially in Ontario every quarter since launch.

Still still very strong there.

Great. Thanks, guys.

Thank you at this time, we currently have a nice to have the questions.

Richard Schwartz: You're at the point now where you're going to start to see over time, I think the quality operators will start to scan down more from the pack, because now you have a situation where everyone's converted, everyone's now on an equal playing field, and ultimately we're excited by that market opportunity because we do think the experience we offer is unique and differentiated, and when players try as they stay with us. So our goal is to get a larger number of players, not previously familiar with our brand, to give us a try with the recognition that when they do, we have a pretty good shot of keeping them.

Back to Richard for any further remarks.

Thank you again for joining US today, we have spent the better part of 11 years getting to the point, where we are today, we are a leading technology platform in the industry and one we are demonstrating the customers love it.

Multiple opportunities to grow our business and we're disciplined in how we execute our growth.

Well capitalized.

Altogether, we are where we want to be well positioned for future revenue and profitability growth in the future.

Kyle Sauers: Yeah, will I just take a peek, and without giving you exact number, our our mouth has grown sequentially and Ontario every quarter since launch, so still still very strong there. Great, thanks guys. Thank you.

We look forward to updating you on our progress when we share our fourth quarter and full year results early next year.

Thanks.

Thank you for joining today's call you may now disconnect your lines.

[music].

Okay.

Richard Schwartz: At this time, we currently have no further questions, so I'm back to return to tools for any further amounts. Thank you for joining us today. We've spent a better part of 11 years getting to the point where we are today. We have a leading technology plus from the industry, and one, we are demonstrating the customer's love. We have multiple opportunities to grow our business, and we're disciplined in how we execute our growth. We are well capitalized. All together, we are where we want to be. Well, was this in for future revenue and profitability growth in the future?

Thank you for joining today's call you may now disconnect your lines.

Yeah.

Richard Schwartz: We look forward updating you on our progress when we share our four quarter and four year results early next year. Thanks.

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