Rush Street Interactive, Inc.

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. I'll now turn the call over to Kyle Sowers, 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 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 risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation, or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 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 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 iCasino and customer-centric approach. 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 the 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. 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% versus the prior year quarter. We are seeing that growth come from both increasing handle across products and higher sports hold, due largely to our ability to innovate. which I will get to shortly. 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 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. 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 fun experiences that appeal to them. while continuing to achieve sustainable growth and profitability. Our customer-centric focus is working. We maintain market-leading ROIs driven by industry-leading unit economics with growth opportunities via access to future iCasino 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 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. 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 that 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 at 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. The end result This quarter is the first time in the company's history that our Sportsbook-only markets are profitable. This sets us up well when iCasino 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 of bait and product and customer experience have begun dictating where people play or which online gaming operator they choose to spend the largest share of their wallet with. We have been faring 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. 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 launched later than our competitors. and without any starting database or 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. 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 maintaining a significantly higher art mal versus the competition. This is in 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 revenues since launch in 2018, as the results reflect 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 Bett Rivers brand in New Jersey last summer. In our U.S. online sportsbook-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 hours high in those markets. In Latin America, we continue to perform well, with revenue contribution now over 11% of total revenues. 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 were beginning with a small base, very similar to what Colombia looked like several years ago. Thus, the sequential growth this quarter was very high, near 90% compared to the June quarter. As we've conveyed prior, the approach in Mexico takes the playbook from Colombia, where over a several-year period, we cultivated the RushBet brand by consistently localizing the platforms, and creating a great player experience that consistently improves. As a comparison, Mexico has generated more than two times the revenue of Colombia when measured from launch date. Needless to say, we remain bullish on the Mexican opportunity for RSI. Looking ahead at expanding our footprint, we announced some very exciting news in August. we share with the market that we were selected by the 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 iGaming and online sports platform in the state, powering online casino and sports betting for each of the state's three casinos. We are very excited for this opportunity as we see Delaware as a market that plays to our iCasino strengths 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 revenues. 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. Our agreement with the 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 iCasino experience by bringing new functionality and features not previously available to online players in Delaware. 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. We'll 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, Senator New York has indicated plans to reintroduce legislation for 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. 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 if. In our focus on customer engagement and retention, we have made tremendous progress on the product and technology front, recently in both iCasino 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 libraries supplied to us by third-party game studios. Over the past 10 years, we've 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. Whether it's our unique to the industry community features or our flagship casino promotional engine, our goal has always remained constant, to increase ARPU 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 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 in the online casino vertical. However, I'd also like to point out that strong execution on game integrations and launches also matters for players. Execution terms are offering a great breadth 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 1,000 new slot titles. We were first to market with many important titles, demonstrating the seamless way we work with game providers to integrate 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 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 the launch of Prop 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 was decentralized throughout the app. 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 sportsbook. We continue to leverage the success of our bespoke squares game. Starting with this football season, we have made squares available on every NFL game and most college football games. We are giving customers more chances to win bonuses and achieve profit boosts. We've even added a bad beat mechanic to Square to drive increased engagement with sports bettors. We feel really good about where we are positioned. As we've 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. We maintain the fiscal and operational discipline to be able to keep growing our profitability over time. 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 U.S. Canadian and LATAM markets, all of which grew double digits during the quarter. 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'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 EBIT 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 sportsbook-only markets with a greatly improved product which positions us extremely well when these markets add iCasino. In fact, while we continue to see strong profitability from our iCasino markets, as Richard pointed out, this marks the first quarter we were profitable in our sportsbook-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 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. 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 parlays increased by 55% year-over-year and the new PropCentral functionality Richard talked about helped drive 87% year-over-year increase in PropBet 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 result was an improvement in gross 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 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 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 ARPMO. 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 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. 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 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 turned positive, We are 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.

Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your 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. Our first question for today comes from a 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, Kyle. You just kind of referenced the guidance range for 23 moving up. At the midpoint... I think we lost Jordan there.

Are we still live on the call?

Oh, Jordan, you might have muted yourself locally.

Yep. Sorry. Can you guys hear me?

We can hear you now.

Hello? 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 competition falls into that number when thinking about maybe the top end or either the lower end of that range, just given some of that incoming competition coming up here?

Sure, I'll take that one. I think, you know, it's a factor, but there's a lot of different factors when we think about defining the revenue range. You know, 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 with 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 is a piece of it, but it's one of many factors.

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

Yeah, thanks for the question, Jordan. I think Maybe to start with just the bonusing 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 bonusing. So I think we just need to understand that extrapolating out from one or a few markets when you're looking at bonusing doesn't necessarily apply to every market. I will point out that we were particularly low last year in Q3. So from a year-over-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 bonusing 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 bonusing for retention and reactivations. And then to the last piece of your question about iCasino, that's been a relatively flat force. I think it was actually down year over year in terms of percentage of bonusing 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 given that we're three-quarters-ish iCasino versus sports.

Great. Next 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. um the delaware opportunity sounds like a you know pretty exciting one um can you just talk about the scale and scope of how we might think about that um you know relative to the size of your business or any sort of color you can put around its magnitude would be helpful carl why don't you take that one i think hi david i should talk to you um

We're excited about the market, but I think in terms of the actual impact financially, I think we'll turn it over to Kyle to mention.

Yeah, so obviously it hasn't launched yet, not included in any guidance. We'll 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 be put to work, and that's new there. The market's pretty small right now, but over time we think there's a pretty nice opportunity to expand. It's not going to happen overnight, but 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 just match up adult population, income levels, You could argue that Delaware is only one-tenth the size relative to those other states as it should be over time. So again, it'll 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 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. And 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 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.

Okay. Thank you very much.

Thank you. Our next question comes from Chad Baynon from Macquarie. Chad, your line is now open. 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. flow through in the 75 to 100 percent 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 percent so first question on that and then more importantly as 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 fixed costs. Thanks.

Yeah, I'll take that one, Chad. Thanks for the question. I think on the flow through here in the near term, it's probably getting too precise to pick a percentage. There's a lot of moving parts here. Even things as simple as the currency fluctuation that I mentioned that was a million dollar uh pick up for us in q2 and a million dollar headwind in q3 um at at these levels with this um these you know single digit profitability uh it starts to have the 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 is we expect to continue to grow obviously this is a this is a growth market um we're a growth business and that's independent of of new market launches um 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 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've 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 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 a license, you have a way in, but haven't launched to this point. Thanks.

I'll take that one. I think every market we continue to look at on a case-by-case basis, looking at all the things like the tax rates, likelihood of iCasino being added, etc., it sure gives us some confidence to know that we are able to achieve this profitability and achieve better results in the sports-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. And so we are being selective, and I think we're making some really good decisions on which markets to 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, Jed.

Thank you. 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. One, I wanted to just clarify, when you talk about gaining shares, is it gross revenue, net revenue, handle? Yeah, if you can just clarify there. And then what do you attribute this to? Is it a product, a change in 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

know changing in the next few months yeah sure dan i'll just take the first part on the on clarifying it's a good it's a good point so we're looking at ggr when we were giving some of those uh share changes um you don't have net in in all markets um ggr you do um 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 isn't really something with it's not a primary motivation for us We're trying to get to the profitability in 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 reported for those of you follow it just came out today on the sportsbook side and we moved up a couple of spots and into four and out of 36 products in terms of the quality on the Sportsbook side. So I think that's a great example of when you combine the product 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 and 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 As I've noted in the past, we started by doing casino innovation, and we now just sort of started to release some of our sportsbook capabilities, and these sportsbook features are working. And players really notice when you offer them something that's unique and differentiated and high quality, and you start to get some momentum from those differentiation features that we're bringing to market. So that's sort of the answer to your question.

Got it. Thanks. And 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. I guess, can you unpack that a little bit and let us know maybe what are some of the leaders versus laggards there? And among those laggards, do you see a path to becoming, you know, EBITDA positive in those markets over time?

Sure. Yeah, I'll take it. I think the I'm not going to give specifics on each market and start to break down profitability exactly by market. But I think if you look at the markets where we have stronger revenue, bigger share, or 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. 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.

Got it. Thanks for the color and nice quarter. Thanks.

Thank you. Our next question comes from Jed Kelly of Oppenheimer. Your line is now open. Please go ahead.

Great. 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 bonusing 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 term, anything in terms of like licensing or taxes or revenue share we should be aware of as we're thinking about building that into our 2024 model. Thank you.

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 the product improvements on the SportsWorks side are very meaningful. We've been talking about it for several quarters, even since last year, how much better the product's 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. We have the squares feature, which players really talk about winning, where they make the same bet with any app on the same sort of spread bet with any competitor, including us, but when they bet with us, they get an extra chance to win at no extra cost, up to $10,000 through a lottery mechanic if their square lands. So just giving players something fun, something unexpected, something different, you know, is a is a capability that really helps to drive some users. We've also made a lot of improvements in the way we market our props. The Prop Central was referenced earlier in my notes. Really, it's having a meaningful impact on exposing really important bets 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 bonusing 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 the money to the players. You're not seeing that type of aggressive bonusing anymore. And I think that'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 operate.

And real quick, Chad, we covered some of the Delaware, but just the highlights. 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. We do think it won't be a big headwind for us in terms of profitability. 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 higher as we get to profitability.

Great, and then just one quick follow-up. How much have October holds factored into your 4Q guidance? Thanks.

Sure, so certainly we take the hold we know about to date and the revenue generation that we have to date, but that's going to fluctuate 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 November and December as well. Thank you.

Thank you. Our next question comes from Joe South of Susquehanna. 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, in some of your older markets, iCasino 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 where you said, you know, miles were up 4% in iCasino markets year over year, but I was curious if I assume that's both products, and if I exclude sports, I'm wondering if your users were up, you know, kind of year-over-year, specifically for iCasino.

Yeah, so maybe I'll take the first part and let Richard talk about, you know, the markets in general and growth opportunity in those more mature markets, but, 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 U.S. and Canadian markets, mouths were up 4% year over year. And we say at casino markets, you're correct. That's people who are in those markets. 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 Pennsylvania to grow our users, we certainly think there's an opportunity as we continue to work close with a land-based 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 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 and 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 we've ever worked 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 to show some results from that collaboration.

And just to clarify, you know, again, sir, you know, in that 4%, is there any way you can give us a look? You don't have to give us the exact number, but if I were to exclude sports-based customers, I'm just curious, again, if iCasino users had grown year over year in third quarter.

Yeah, I think breaking it down that far is further than we expect to do on a call like this. But, you know, up 4% in those markets. I think we're having great success in iCasino. Richard talked about market share in those markets. We're growing in those markets. So I think we're real pleased with the way the user count's been trending there. Okay.

And then if I could just two follow-up real quick ones. What is the timing on Connecticut exit, and are you interested in possibly, I don't know, selling, subleasing, whatever the right terminology is, on your New York market access?

On the Connecticut announcement, there's been no public announcement at this time, so there's nothing further we're able to comment on beyond what we talked about previously where we thought – By the end of this year would be the timeline that we're operating within. In terms of New York, there's not a belief right now to consider selling that asset. It's certainly something that's limited. Scarcity is 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 iGaming potentially. So for us, it's very strategic to be able to have that asset.

Thanks a lot.

Thank you. Our next question comes from Ryan from Craig Hallam. Your line is now open. Please go ahead.

Good afternoon. This is Will on for Ryan. Thanks for taking our questions. Maybe just a few quick ones for me. First one I wanted to talk about was you did a partnership with Genius Sports for BetVision. They're sort of watch and 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.

Sure. Hey, Will. It's Richard. There's only a handful. There's only three or so other operators than us that are using it. We actually have already deployed it, and so we're not really speaking about any data results from this at this point. It's the 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 well it works, and if we can get some increased betting volume based on having something that's relatively unique in the space.

Great. And maybe as a follow-up to that, I wanted to hop to Ontario. Last call, I think you guys said your ARPMO compared to competitors was double that. Just curious maybe how's that change during the quarter and any other comments on the Ontario market?

Yeah, our amount 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.

I think it's been consistent in terms of high performance and getting a higher share of wallet, which is ultimately what matters most in those markets. Players are going to play multiple sites, but how much of their budget are they going to allocate towards the better experiences and sites they prefer? And we think the reflection of the high ARP now is an indication that they really prefer, in many cases, 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 to white market very fast. But it's at the point now where all the existing prior operators have converted their player bases. So you're at a point now where you're 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 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 us, 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.

Yeah, Will, I just took a peek. And without giving you an exact number, our art now has grown sequentially in Ontario every quarter since launch. So still very strong there.

Great. Thanks, guys.

Thank you. At this time, we currently have no further questions. So I'll hand back to Richard Schwartz for any further remarks.

Thank you again for joining us today. We've spent the better part of 11 years getting to the point where we are today. We have a leading technology platform in the industry and one we are demonstrating that customers love. We have multiple opportunities to grow our business and we're disciplined in how we execute our growth. We are well capitalized. Altogether, we are where we want to be. well positioned for future revenue and profitability growth in the future. 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. Thank you for joining today's call. You may now disconnect.