Rush Street Interactive, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Rush Street Interactive first 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, May the 3rd, 2023. I would now like to turn the call over to Kyle Sowers, Chief Financial Officer.

Thank you, Operator, and good afternoon. By now, everyone should have access to our first quarter 2023 earnings release. It can be found under the heading Financials Quarterly Results in the Investors section of the RSI website at RushStreetInteractive.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. We assume no responsibility for updating any forward-looking statements. Therefore, you should exercise caution in 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 and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our first quarter 2023 earnings release and our investor deck, which is available in the investor section of the RSI website at RushStreetInteractive.com. 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. With that, I'll turn the call over to Richard.

Thanks, Kyle. Good afternoon and welcome to our first quarter 2023 earnings call. We began the year with a terrific quarter. Revenues of $162.4 million were up 20% compared to last year. We achieved this revenue growth more efficiently with stronger than expected adjusted EBITDA performance. As we remain disciplined in how we allocate our marketing spend, and managed our G and A costs. These results continue to support our view that online casino is a key driver for us in achieving our long-term goals. Our business model and focus is centered around our deep understanding of online casino customers and developing experiences that will engage and retain them. In markets where we operate both online casino and sports betting, we continue to see a significantly larger opportunity for top line expansion combined with higher levels of profitability. Our strategic decisions consider our long range objectives and our goal of delivering consistent and growing profitability for our investors. We continue to see the second half of this year as one where we expect to be adjusted EBITDA positive. Our year-over-year growth was broad-based, with growth in both our iCasino and Sportsbook-only markets. In addition, we grew revenue over 100% in Latin America and in North American markets launched after 2020. Internationally, we had an excellent quarter. Starting in Ontario, which is obviously an extremely competitive market, our handle continues to grow nicely. And we grew GGR by 33% compared to the fourth quarter. And with improved efficiency on promotions, we increased revenue by 38% sequentially. Not to be outdone, we continue to perform very strong in Columbia. Revenue, once again, expanded at a very high growth rate year-over-year. In the first quarter, on a year-over-year basis in Colombian pesos, we grew by over 40% across the board, including in handle, GGR, and revenue. In US dollars, we grew revenue 20%, reflective of the year-over-year headwinds in foreign exchange rates. Looking at Mexico, we remain focused on building our foundation in the market. Not much different than Columbia a few years back. We believe that our deliberate and measured ramp will support stable long-term growth and profitability in Mexico. We are continuing to localize the platform and user experience, which is especially important in this market. given there are several characteristics unique to Mexico. At the same time, we are building brand awareness and local market acumen by leveraging our partner, Grupo Multimedios. We continue to expect to see a ramp up in contribution from Mexico beginning towards the back part of this year. On the new market front, while no proposed new online casino legislation in the United States crossed the finish line. From our vantage point, a 2023 legislative session saw a significant amount of progress. There were more efforts and discussions across the country about online casino legislation than we've ever before witnessed. In fact, our count is that six online casino bills were introduced this year. Just last week, Ohio's House added language to its proposed budget to study the future of gaming, including online casino. This example and the progress being made in other states to legalize iGaming validates that regardless of the near-term outcomes, there are greater legislative efforts being made and momentum is growing. As we have mentioned prior, the facts are straightforward. The online casino market And even the online slot market by itself is significantly larger than the sports betting market in those states where both are legal. This means that we would expect the legalization of online casino in new markets to provide an outsized benefit to RSI, given that we often earn three to five times the market share in online casino compared to sports betting in those same states. I also want to touch on our recent announcement regarding the state of Connecticut. As I mentioned in my opening remarks, we are very determined to build profitability in a manner that makes sense for our shareholders. Towards that end, we announced a joint agreement to wind down our online and in-person sports betting partnership with the Connecticut Lottery. The Lottery has begun an RFP process to pursue a new operator, and we are planning to continue to support that market until that transition happens, likely sometime in the second half of this year. The agreement with the Connecticut Lottery does not include any separation-related payments in either direction. While this wind down will have an impact on our future year's revenues, it will also have a positive impact for us on profitability in the coming years We thought long and hard about this decision. Ultimately, we are staying true to our strategy. In any market, we have to see appropriate return on our investment. As the Connecticut Market and Partnership unfolded, it became clear that it was not the right fit for RSI, and our capital and resources could be used more efficiently elsewhere. When it comes to marketing, we remain disciplined in our strategy. We use a returns-based approach for customer acquisition and focus on attracting high-value customers to our platform. As forecasted, our marketing expenses came down considerably this quarter as we moved further away from our many market launches over the last couple of years. We expect the spending decrease to continue in the second half of the year. Turning to product and innovation, we continue to pride ourselves on our ability to differentiate and innovate. We have invested and continue to consistently invest resources to build efficiencies and improve the user experience. In addition, we constantly strive to bring new features to market. A terrific recent example of a new online casino experience is the announcement we made in early April about the launch of a first-of-its-kind online slot tournament in Michigan aptly called the Bett Rivers Michigan Million. Players are given the opportunity to earn tournament points and experience the excitement of the tournament's real-time leaderboard to qualify for the chance to win portions Of $1 million in total bonus money, players in Michigan were able to visit Bett Rivers from April 1st to the 30th to register and play. We're having a nice reception to this unique experience with Michigan as our first test, and we are excited to find new ways to increase player engagement in other markets with our differentiated online slot tournament engine. On the Sportsbook side, we leveraged our unique feature, our proprietary squares engine during basketball with March Madness and the NBA and we've seen really strong improvement in both average bet sizes and same game parlays as a percentage of total bets. In fact, same game parlays as a percentage of total bets have more than doubled since putting that promotion in place for NBA games. Finally, I want to congratulate the entire team at RSI for winning the Customer Service Operator of the Year at the EGR North America Awards event last week. This marks the fourth year in a row that we have won this prestigious industry award and is further validation of the cultural value we place in bringing world-class service and products to our customers. We also understand the trust is one of the biggest drivers for consumers in choosing an online gaming and sports betting company. And that's why we automate our systems and empower our customer service teams to earn players' trust by finding ways to quickly resolve tension points for any player in need of support. With that, I'll turn the call over to Kyle.