Rush Street Interactive, Inc.

A question and answer session will follow the formal presentation. Please note that this conference call is being recorded today, August 2, 2023. I will now turn the call over to Kyle Sowers, Chief Financial Officer. You may proceed.

Kyle Sowers Thank you, operator, and good afternoon. By now, everyone should have access to our second quarter 2023 earnings release. It can be found under the heading Financials quarterly results in the investor 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 risk 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 gap measure is available in our second quarter 2023 earnings release and our investor deck, which is available in the investor section of the RSI website at rustreinteractive.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 thank you for joining us today as we discussed our second quarter 2023 results. As an organization, we are executing very well and have achieved positive adjusted EBITDA during Q2 ahead of expectations. We continue to deliver top line growth while capturing meaningful operating leverage and efficiencies that are driving our bottom line. I want to touch on a few topics today. Let me start off with a few high-level takeaways from the quarter. We're really pleased with our overall performance. We generated $165.1 million in revenue, which was up 15% from last year, and which again exceeded the street consensus. Additionally, in the first half of 2023, we've improved our adjusted EBITDA by over $54 million relative to the first half of 2022. We are proud that almost two-thirds of our improved profitability was driven by revenue growth and improving operations, with the remaining one-third for more efficient marketing spend. These results set us up well for the second half of the year, where we continue to expect to be adjusted EBITDA positive. From my perspective, Our results reflect our commitment to innovation, customer satisfaction, and sustainable growth and profitability. The ability for us to achieve these results also validates the quality and commitment of our team, which I believe is one of the best in the industry. We continue to build upon our strong foundation as we have solidified our position as a top five operator of online gaming and sports betting in the United States. Growth in our domestic markets was broad-based. As in the prior quarter, we experienced year-over-year growth in both our online casino and sportsbook-only markets. In fact, when looking at US markets launched after 2020, along with our international markets, we grew over 35% year-over-year in the second quarter. This further demonstrates our ability to launch and grow in new markets by building our brand and enhancing the player experience. On the international front, we had another strong quarter. We continue to perform very well in the highly competitive Ontario market as we are generating outsized year-over-year gains as well as sequential growth. Ontario has recently increased the amount of data they're sharing. two things jump out to us. First, further evidence that our art mail is significantly higher than the markets, coming in at well over two times that of our competitors. Secondly, this is also the first time they've broken out the difference between casino and sports, with casino making up almost three quarters of the market. This trend is similar to what we've seen in U.S. markets with iCasino. and should provide an outsized benefit to RSI as future iCasino markets launch. Colombia once again was a strong performer, with revenue expanding over 30% compared to last year. During the quarter, we achieved growth of almost 50% when measured in Colombian pesos. In Mexico, we remain on schedule to see a ramp up in contribution towards the back half of the year. Our approach here is similar to the strategy we executed in Columbia over a several-year period, which is to consistently localize the platform to foster a market-leading player experience and cultivate the Rush Bet brand. Turning to prospective markets, we continue to see positive activity on the legislative front. Given the economic prospects and the potential size of the online casino market relative to the sports betting market, We continue to see online casino more and more as a topic on state legislative agendas post the 2023 sessions. As we touched on during last quarter's call, Ohio's House added language to its budget to study the future of gaming, including online casino. In late June, both the House and the Senate passed a bill that calls for a joint committee to study on this topic, which is expected to include iGaming. In addition, since we last spoke, there have been advancements in Maryland as part of the fiscal 2024 budget, the State Lottery and Gaming Commission has been mandated to submit an iCasino study to the General Assembly before year end. Notably, a prominent legislative member of the state has expressed optimism about the potential for passage of iGaming bill when the legislator reconvenes in January. In his remarks, the legislator, emphasize the state's need for new revenue streams, and recognize the significance an online casino could represent as a valuable third leg of the stool, along with existing online sports betting and traditional land-based casino markets. The Commission expects the work on the study to begin later this summer and be complete by mid-November. We also continue to participate in discussions in states such as New York, Illinois, and Indiana. where progress was made this past year, but for one reason or another didn't cross the finish line. In most instances, in states where we see progress, the topic doesn't simply recede. Rather, it tends to evolve. Those are the types of discussions we continue to see where there was active legislation this past year. We've also seen more interest from governments in the Canadian provinces as they evaluate legalizing online casino for private operators. following the lead of Ontario. Based on our success in Ontario, these efforts are potentially very exciting for us. As we've said several times before, we continue to remain confident over the long term given the potential economics to government budgets, especially when compared to inflows from online sports betting. Turning to our promotional efforts in line with our objective to deliver sustainable growth and profitability We are constantly refining and optimizing our strategies. We continue to allocate resources, including product development, bonusing strategies, and operating priorities, towards retaining and serving customers and segments that align with our long-term financial objectives. In other words, we focus on the highest value players who we expect to be long-term profitable. Our MAU and ARTMAU numbers for the quarter reflect these efforts to emphasize greater investment in higher value players. With this focus on quality and a more rational promotional environment in the market, combined with improvements and new features available in our platform, we are well positioned and excited to head into the fall and the upcoming football season. On the product and technology front, We continue to innovate in both iCasino and sports betting as we look to drive engagement and retention. In iCasino, in addition to the many ways we improve engagement and retention with features like slot tournaments, bingo, and wheel spins, we've recently introduced a jackpot hot mode feature. This feature is designed to enhance the excitement of daily and hourly jackpots. The way these jackpots work is that they are guaranteed to be paid out. Ahead of payouts, players are typically informed and are aware that their chance to win a jackpot is growing as the guaranteed periods approach. Thus, the final minutes of the hourly jackpot and the last hours of the daily jackpot are designated as the hot period, offering players a higher excitement level and anticipation of possibly winning the jackpots because someone is guaranteed to win within a set period. In sports betting, Adding features to enrich our parlay and prop bet offering has been a priority. We continue to add features to encourage more parlay and prop bets. For instance, during the second quarter, we aggregated player props by league into distinct list views, providing easier findability, more prominently showcasing prop bet types. The impact has been immediate. Baseball prop bets this year in the second quarter were up more than 60% compared to a year ago. We are very excited with this addition and other merchandising improvements we're planning to release heading into the NFL and NCAA football seasons. Another example of strong player response is the success in the quarter with the use of our proprietary squares game during the NBA playoffs to incentivize players to place parlay bets. When we configured squares to be issued during the NBA playoffs for a same-game parlay, The percentage of same-game parlay handled for the NBA increased by over 150% relative to where we were during the regular season before we implemented this configuration. This is validation of the behavioral change we drove in players and a direct result that this innovative product inspired in our customers. As we reach the midpoint of the year, we find ourselves in an excellent position. We continue to grow revenues, improve operating leverage, and achieve our goals. We have a robust balance sheet and plans to advance our proven and proprietary technology platform and operational discipline to grow profitability over time. With that, I'll turn the call over to Kyle.