Rush Street Interactive, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the RSI Third Quarter 2021 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 Lauren Seiler, 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 Financials Quarterly Results in the Investors section of the RSI website at russiainteractive.com. Some of our comments will be forward-looking statements within the meeting of the Federal Security Blog. 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 and 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 FCC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. 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.rushstreetinteractive.com. With me on the call today, we have our CEO, Richard Schwartz, and our CFO, Kyle Sowers. 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, Lauren. Good afternoon, everyone. Thanks for joining the call. I have 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 of sequential revenue growth for RSI. Next, I'll give an update on our market access initiative and some exciting recent developments on new market opportunities. Then I'll talk about our operational and marketing excellence. And finally, I'll walk through product and technology rollouts that are helping 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, as well as sequential revenue growth, demonstrating our continued ability to grow top line while strategically investing in marketing and technology areas that 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 included revenue growth in all of our online casino and online sports market. With this continued success and growth in our business, 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% yearly year top-line growth at the midpoints. This is up from the previous estimated revenue growth of 72% at the midpoint of a prior guidance range. Kyle will provide some additional details in his remarks. Before I get into recent launches, I want to first address the news that 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. RSI has a strong track record of success in New York, overseeing the operations of the Bett River Sportsbook in Schenectady, New York. But New York isn't the only exciting new market to discuss. Subsequent to quarter end, on October 12th, we announced the soft launch of the Play Sugarhouse online sportsbook in Connecticut. The full launch occurred on schedule on October 19th, and since then, we've been delighted to bring our award-winning product to the players of Connecticut as the exclusive sports partner of the Connecticut Lottery. We have subsequently launched four retail sportsbooks wagering locations in the state of Connecticut, in New Haven, Stanford, and Windsor, all of which we opened over two weeks ago. And most recently, yesterday, we opened our fourth book in New Britain. We expect another six locations to be open over the coming weeks. During the third quarter, we also announced our partnership with the Arizona Rattlers, as their partner for online sports betting in the state of Arizona. And we were eager to launch Brett Rivers in that state during October. We now operate Real Money Gaming in 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 for Fun, in the province of Ontario. The free-to-play online casino and sportsbook is available now on all devices through the BetRivers platform. As we have shared before, we've had great success in markets like Pennsylvania and Michigan with converting pre-launch social players into real money bettors. In fact, in Michigan, more than 20% of our pre-launch social players have opened a real money account and 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 can 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 are now live with online sportsbook in states representing 24% of the U.S. population and live with online casino in states representing 10% of the population. The anticipated upcoming launches in Louisiana, Maryland, and New York will increase our sportsbook 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 in future markets. But we are excited to have put ourselves in a strong position already with market access plans in 21 online sports betting markets and 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 so early, we've seen really solid progress thus far. Over the last two weeks, in terms of the handle, Connecticut is already our third largest online sportsbook-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 close revenue in the last seven months, a great testament to user experience we provide and our ability to retain high quality players. In Michigan, we have held steady arc with our online casino market share and are looking forward to soon being able to offer our players an iOS app to remove friction and further improve the user experience. In West Virginia, We've continued to grow online casino shares since we entered the market back in April, and we are now approaching 10% market share. This is another market where launching iOS apps for the first time will be exciting for our players, and we expect to improve player satisfaction. Lastly, in Columbia 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. at greater than 100% year over year. This is a tremendous achievement given our entry into that market several years after it first opened. As I discussed earlier, there will be plenty of new markets to invest in over coming quarters, which will put us in investment mode for the time being. But we are proud of our ability to remain disciplined and calculated in the way we invest and ultimately generate substantial profitability for markets as they mature. Now I would like to switch gears to talk about some of our marketing initiatives, investments, and the results we have. To start, we recently signed two new brand ambassadors to Bett Rivers, tennis great and respected tennis TV analyst James Blake, and three-time Super Bowl champion and NFL broadcasting veteran Mark Schloreff. We are proud to have these two join our other ambassadors as we create new and exciting betting content for our players to enjoy. We're also excited to have launched several hyper local sports betting podcasts in major cities across the country via our CityCast programming, including in the cities of Chicago, Detroit, Pittsburgh, Philadelphia, 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 enhance loyalty, because we know many bettors prefer to bet on their local teams. We recently announced we've expanded our commitment to college football by signing an exclusive partnership for BetRivers.com with a field of 68 and a field of 12 media network. These shows, hosted by former college football and basketball stars, offer our players unique insights into betting and 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 re-engage 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 model considers a variety of factors, including the products offered in the jurisdiction, performance of a diversified marketing channel, predictive lifetime values, and behaviors of customers across various product offerings. 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 times and 5.6 times, respectively. Our marketing spend during the course of this year was 34% of our revenue. which we believe to be near industry lows, further demonstrating our ability to convert marketing investment dollars into top-line revenue. Given these strong results, we have accelerated our marketing investments and have extended the payback period slightly, but we'll only do so prudently and with an eye on long-term profitability. Now, turning to product and technology, as usual, it's been a very busy quarter from a technology and product development perspective here at RSI. as we continue to focus on providing a 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 tables exclusively for Vet Rivers and PlayStation Girls players to make it easier and faster for them to find a virtual seat at a popular online dealer table. Our focus on customer interaction and community responsiveness continue to set RSI apart from other casino platforms. We are also glad to have recently launched Rush Race, a proprietary multiplayer slot tournament for our casino customers. Rush Race is the first of many exciting experiences that are powered by Rush Arena, our innovative multiplayer tournament engine that will allow us to continue to stay ahead of industry and offer a differentiated product keep our players engaged and excited to play on our platform. We have also seen great interest in the Same Game Parlay feature we launched earlier this year. In fact, over 50% of our NFL bettors this year have made a Same Game Parlay wager. When it comes to Same Game Parlay 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 parlays, or even a same-game parlay with another game outcome, or even bet on a different sport. This gives our players more ways to combine bets and create longer odds and bigger payouts. Mostly, it offers another product differentiation that creates loyalty and retention with our players. We're also very proud to be recognized by ours and CryCheck for improvements to our app, where our new Vet Rivers app is now ranked number three out of 35 brands tested. This is a strong for my respected and independent source as we continue to improve functionality and user experience of our app. As always, we pay close attention to the reception to our platform in new sportsbook and casino markets from first-time users when they experience our significantly upgraded app in conjunction with the new features and award-winning customer service. We are increasingly confident that we have built a market-leading Sportsbook app. We also remain on track to begin the rollout of our integrated Sportsbook and Casino iBus app during the fourth quarter. As previously shared, our tremendous success in Pennsylvania and Michigan, and recently in West Virginia, have all been achieved without an iOS app in those markets. We are really eager to see the benefit of enhanced player engagement through our iOS Casino app 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 Casino Operator of the Year at the SVC Awards North America, as well as being nominated as the Social Operator of the Year in a prestigious recognition by online gaming peers. We are also very pleased to have won the Sports Victor of the Year at the 2021 SVC Latin American Awards just a couple of weeks ago. These awards, as voted by industry experts, are 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 Kyle.