Rush Street Interactive, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Rush Street Interactive fourth quarter and year-end 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, March 6, 2024. I will now turn the call over to Kyle Sowers, Chief Financial Officer. You may proceed.

Thank you, Operator, and good afternoon. By now, everyone should have access to our fourth quarter and year-end 2023 earnings release. It can be found under the heading Financials Quarterly Results in the Investors section of the RSI website at RushTreeInteractive.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, and 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. In particular, we will be discussing adjusted EBITDA, which we define as net income or loss before interest, income taxes, depreciation and amortization, share-based compensation, adjustments for certain one-time or non-recurring items, and other adjustments that are either non-cash or are not related to our underlying business performance. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is available in our fourth quarter and year-end 2023 earnings release and our investor deck, which is available at the investor section of the RSI website at rustreinteractive.com. For purposes of today's call, unless noted otherwise, when discussing profitability, EBITDA, or other income statement measures other than revenue, we're referring to those items on a non-GAAP adjusted EBITDA basis. 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. And with that, I'll turn the call over to Richard.

Thanks, Kyle. Good afternoon, and welcome to our fourth quarter and year-end 2023 earnings call. I'd like to start with how proud I am of our team at Rush Street Interactive, what we've accomplished this year, and how we've set ourselves up for success for years to come. We exceeded the high end of our revenue guidance for the year and achieved EBITDA profitability far ahead of our targets. Through strong execution by our team, we improved year-over-year EBITDA by $100 million. We initially set out to be profitable for the second half of 2023, though as a result of our focused efforts, we delivered better results and were profitable for the full year. We ended the year with a record-setting quarter and have started 2024 with strong momentum. Our investments and know-how in creating differentiated and high-quality user experiences are paying off as we simultaneously achieved our growth and profitability targets with increased contribution from all geographies, from both iCasino and sports, and from both our newer and more mature markets. Our 2023 ALPS performance and the momentum in the new year are the result of us continuing to execute on three key operating principles. First, it's the customer. I've said it time and again, product and user experience wins in the end. We have felt this way since we started a business in 2012, and we continue to feel it today. We feel we have a competitive advantage not easily replicated. in that we have spent the past 10 plus years focused on enhancing the user experience as our top priority. We are all about offering customers a world-class user experience that minimizes friction and drives retention. This ethos is fundamental to our success. Second is technology. Investing and continuously improving our best-in-class technology platform is what allows us to support our wide and ever-growing range of differentiated product features and functions, and accomplish our customer and financial goals. Third is operating leverage that grows as we scale. With each year, as we drive growth in a diversified set of markets, we expect to deliver improving earnings and cash flow. This past year, not only did we improve EBITDA by $100 million, as I referenced earlier, but we did so on a $100 million increase in revenue. We saw continued progress in each of these areas throughout the year, culminating in a very strong fourth quarter. Turning to our results, revenue for the fourth quarter was $194 million, up 17% from the prior year. Quarterly EBITDA improved $28.8 million, coming in at $11.5 million, compared to negative $17.3 million last year. For the full year, we grew revenue 17 percent to $691 million, which, as I mentioned, resulted in improved EBITDA of $8.2 million. A large part of the improvement is that we continue to grow revenue much more efficiently. Kyle will provide more detail on the numbers. There are a few things to take away from the quarter and the year. Top-line performance was strong once again, as we are seeing our customer-centric approach and our ability to innovate translate into results. We saw strength across products, both iCasino and online sports betting, and also across geographies, US and Canada, and also LATAM. When looking at different market vintages, it's exciting to note that excluding our US markets launched before 2021, our revenue growth was an impressive 44% during the fourth quarter. We continue to grow faster in our higher margin markets. A couple of highlights of note in the U.S. and Canada. Higher user accounts are driving increased revenue, even as we grow player values. In fact, during the fourth quarter, we achieved our highest year-over-year malgrowth in the last four quarters at 7%, which is was well-balanced between iCasino and online sports betting, only markets. Even more important, that growth accelerated throughout the quarter and has continued nicely into Q1 of this year. Looking at Q4 highlights for a few specific markets, Michigan has seen a strong acceleration in revenue, and Q4 was our highest growth rate in the past year. New Jersey has also seen nice progress in recent quarters, and we hit a new high for revenue in that market since we rebranded Divette Rivers in Q3 of 2022. In Ontario, we continue to have great success with year-over-year growth of 50 percent. West Virginia continued a strong pace as well, where we grew revenue by 80 percent compared to the prior year. Delaware is a market that in a short time has already validated the impact of our high-quality user experience. As a reminder, we are the sole iGaming and online sportsbook platform in the state, powering online casino and sports betting for each of the state's three land-based casinos. It has only been a little over two months, but nevertheless, we are extremely pleased with the start. Over the first 60 days, we are at a run rate that would imply over $60 million in annual GGR, The prior operator only had iCasino, so for comparison purposes, over two-thirds of the GGR is iCasino, and the rest being online sports betting. Comparing apples to apples, the online casino results, which at this point was simply our replacement of their prior online casino platform and operations, is running above three times what the previous operator was doing. Obviously, we are seeing strong initial results in online sports betting, which has never been offered to players in the state prior to our launch. These initial results, in our view, highlight our differentiated product and user experience and why, time and again, we are able to excel in markets that include iCasino. Moving south, we continue to execute extremely well. demonstrated by the fact that LATAM continues to show very strong performance. Revenue in Colombia grew over 65% year over year, while in Mexico it was up approximately 60% quarter over quarter. This brings fourth quarter LATAM revenue contribution to over 13% of total revenues, the highest level in our history. Latin America remains topical both for us as well as within the broader industry landscape, as several countries are planning for iCasino and online sports betting expansion. Simply stated, we are a proven leader in Latin America. We have a demonstrated track record of success, powered by significant infrastructure investment, technology localized and customized for the region, and the know-how that only comes from on-the-ground experience. Nowhere demonstrates our capabilities in LATAM better than Columbia. Our results in Columbia continue to grow at a very rapid pace, as fourth quarter revenue growth accelerated to its highest rate of the year. We've come a long way and expect a lot of growth ahead. Five years ago, we set out in Columbia with no brand recognition, no databases, no employees, no relationships, essentially nothing. No one in our company even spoke Spanish fluently. By focusing on the fundamentals and building the business in a sustainable way, we've grown to the point where we believe that we've recently become the second largest operator in Colombia. We've achieved the success by investing in the business and executing on the fundamentals from the very beginning. We have built an entire organization locally, including the full operations, marketing, payments, legal, compliance, finance, HR, and development teams. Our strong presence has allowed us to develop local relationships and, more importantly, earn and retain credibility in the market with our employees, partners, and customers. This approach has served us well as several competitors, some global operators, entered the market during the last couple of years. Despite their initial effort and aggressive marketing spends, they have not been able to capture meaningful market share. Bottom line, Colombia remains an exciting market for us. It is both fast-growing in itself with years of growth ahead, while at the same time providing us the foundation to expand in LATAM, as we are doing in Mexico. In Mexico, as we shared after we launched in late 2022, our expectations were to begin seeing a meaningful ramp-up in the second half of 2023. We were able to deliver on this as represented by the 185% revenue growth in the second half compared to the first half of last year. When compared to our start in Colombia, we have generated about two times the revenue since launch in Mexico over the same time period. Couple this with our app being one of the highest rated in Latin America, and we are poised for continued success. Beyond our current footprint, Laptown is a region where there are several opportunities to play to our strengths. Many investors are aware that in late December, the President of Brazil signed legislation authorizing the regulatory framework for both online casino and sports book. This is the conclusion of a lengthy legislative process that for much of the time was thought would only lead to legalization of sports book. Fortunately, especially for RSI, At the end of the process, online casino was added. For us, this inclusion of online casino certainly makes the market opportunity bigger, and it is another aspect of legislation that plays to our strength. There are many regulations and complexities still to be worked through for the Brazilian market, but we have spent a long time preparing to leverage our technology and capabilities in the country and plan to participate. We look forward to updating you on our progress in coming quarters. There is also Peru, which gets a lot less attention, but which we are very excited about as well. Last year, Peru not only approved laws governing online gaming and sports betting, but it also published online gaming regulations. This is an exciting market for us, given its adjacency to Colombia and shared media markets, meaning that many of the soccer TV broadcasts that we market on in Colombia are viewed by consumers in Peru. In fact, our research has shown that our Rush Fed brand is already widely recognized in Peru. As our timing becomes more clear on a Peru launch, we will share more details. Notwithstanding, we expect to launch later this year. In terms of how we see the market size of both countries, the population of Brazil is over 200 million people, and Peru is about 35 million. Compare that with Mexico, which is 130 million, and Colombia, which is 50 million. Safe to say, between ramping Mexico and then with Brazil and Peru legislative activity, we are seeing significant near and intermediate term opportunities to target a population of over 425 million people and over an estimated $6 billion total addressable market in these four regulated Latin markets alone. Shifting to the North American legislative outlook, We are at the beginning of 2024's legislative sessions around the country, and there are a host of states on our radar that we are watching closely for iCasino opportunities. We certainly discussed them at length on past calls. While we are not laying odds on legislative outcomes, some of the states that we are watching include New York, Maryland, Illinois, as well as provinces in Canada, most notably Alberta. As we look ahead, along with exciting growth initiatives I've mentioned regarding Latin America, have us very excited about the future. There is no shortage of near and long-term opportunities in our universe. We remain confident over the long term. Given the beneficial economics to government budgets, especially as compared to inflows from online sports betting, that expansion in iCASUNA legislation is increasingly a question of when, not if. More and more positive momentum is building, some quite visible to the public, and more behind the scenes as the online industry ratchets up its focus and investments in legalizing iCasino in more markets. Now, I'll hand it over to Kyle to talk in more details about the financials.