RSI - NYSE

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Rush Street Interactive First Quarter 2023 Earnings Conference Call will follow the formal presentation. Please note that this conference call is being recorded today, May 1, 2023. I would now like to turn the call over to Kyle Sauers, Chief Financial Officer.

Thank you, operator, and good afternoon. By now, everyone should have access to our first quarter 2023 earnings release that can be found under the heading Financials Quarterly Results in the Investors section of the RSI website at restreinteractive.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 Investors 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&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 eye Casino and Sport 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. We -- not to be outdone, we continue to perform very strong in Colombia. 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 U.S. 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 our 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 Multimedia. 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 across the finish line. From our vantage point, the 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 6 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 we 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 and 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 3 to 5x 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 Kinetic 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 Connect 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, Apple call that that River's Michigan million. Players are given the opportunity to earn turnon endpoints and experience excitement of the tournament's real-time leaderboard. To qualify for the chat to win portion of $1 million in total bonus money, players in Michigan were able to visit BetRivers from April 1 to 30 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 a 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 in 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 that 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.

Thanks, Richard. First quarter revenue was $162.4 million, up 20% year-over-year, showing balanced growth throughout our business. Consistent with our strategy to invest more in markets with online casino, monthly active users in those markets increased double digits year-over-year. In total, our miles for the first quarter in the United States and Canada were 147,000, up 3% year-over-year after excluding New York due to the impact of the launch in that state on last year's numbers. We continue to demonstrate our leadership position in player engagement and monetization with North American Art miles coming in at $325 during the first quarter, up 23% compared to last year. RPMs continue to remain very strong as we attract and retain high-quality players to the platform. Turning to profitability. Our adjusted EBITDA loss for the first quarter was $8.7 million, an improvement of 80% compared to the prior year better sequentially and our best performance in the last 7 quarters. We believe this puts us squarely on the path to positive EBITDA for the second half of the year. These results came in better than our internal expectations, largely as a result of lower expenses. Digging in a little deeper, advertising and promotions expense was $49.4 million for the first quarter, down 26% compared to the year ago period and down 22% sequentially. We remain committed to spending appropriate amounts by market for new players and monitoring their long-term value. In many of our markets, an increased effort is being shifted to retention and reactivation activities, which can be more cost efficient. As we previewed on our last call, we expect Q2 marketing spend to be lower than Q1. But given our lower spend in Q1, not as big of a decline as we may have originally expected. We do still expect marketing to decline further in the second half from where we expected to be in the second quarter. Gross margins improved around 800 basis points year-over-year, driven by higher margins in many of the markets where we're growing more quickly as well as by some improvement as a result of the New York launch last year. As mentioned on our last call, we expect to see a full year improvement of several hundred basis points in gross margin in 2023. Turning to G&A. Costs increased 19% year-over-year and 10% sequentially to $14.7 million during the first quarter. While we continue to make investments in both our technology and corporate functions, we remain vigilant about monitoring costs and the way we invest to support our growth and innovation plans over the coming years. Having said that, we expect G&A costs to continue to trend higher as the year progresses. Our balance sheet remains in excellent shape, and we believe we're more than fully funded to profitability. We ended the quarter with $147 million in unrestricted cash and no debt. We're maintaining our full year revenue guidance for 2023 of $630 million to $700 million. And as a reminder, our guidance includes only those markets that are live as of today. As these results demonstrate, our strategy to focus on those markets that offer the highest returns, a disciplined marketing approach and a modest approach to building our corporate costs, puts us on the path to generating growing and sustainable profitability in the markets we've already launched and the ability to invest in new markets that offer strong return potential. With that, operator, please open the lines for questions.

Our first question comes from Chad Beynon from Macquarie.

First, I just wanted to ask about the Q1 revenue performance. Great to see the outperformance compared to where most were expecting. We've seen a few major players, obviously, the one that has gained share in the quarter, make some moves, and that's a core part of their strategy. Always tough to tell where they're taking share from. But I was wondering if you could just talk about how you saw some of your your core big revenue, I guess, foundational pieces on the iGaming side perform during the quarter, particularly as we saw some more competition and kind of how that portends for future revenues in the year?

Sure. Thanks, Chad. I'll take that, and Richard can add on, if you'd like. But we were very pleased with the performance in Q1 on revenue for sure. It came in relatively close to our expectations. Obviously, we'd be beat the analyst numbers by a decent amount, which was good to see. I think our -- the performance across markets across casino and sportsbook, it was pretty broad-based and no big surprises. You point out, it's hard to know when share is shifting around who it's coming from or where it's going to. So I don't have a whole lot to add there. As we highlighted in the prepared remarks, Richard commented we had really strong growth in Latin America and the North American markets that launched after 2020. So really not included in that group is Pennsylvania, Illinois, New Jersey. Those are more mature markets. Those make up more than half of our revenue. So we're seeing really strong growth in all these newer markets. And I think you point out that's where we don't necessarily benefit from the rivers, casinos and the brand known as well. So a really good sign. And then another promising piece there is those markets that we're seeing a higher growth in, it's also where we have higher gross margins. So that's been incrementally beneficial for us as you see in the gross margin improvement.

And then as a follow-up, again, on the revenue guidance, has anything changed just in terms of what you're underwriting for dollar amount or timing of the launch in Mexico? I know you said second half is when we start to see that, but we're approaching that pretty quickly. Just wondering if everything is on track with where expectations were last time we spoke.

Sure. Yes. We haven't given any specific numbers on that, but you're right. That's what we've said, and that's what we continue to expect is that we'll start to see results ramp a little bit more in the back half of the year. So we're really excited about that market. But in terms of that impacting guidance or a change in view there. No big changes. As you probably saw, we reiterated guidance, kept that the same and Mexico being a much smaller piece of it, but a piece of it really didn't impact it either way in terms of our thinking on the guidance.

Kyle. Appreciate it.

Our next question comes from Jed Kelly from Openheimer.

Just can you talk about how you're approaching new states that are coming on as we get through this legislative cycle. Obviously, you're not participating in Massachusetts, but any thoughts on how it relates to like participating in Kentucky. And then you mentioned potential iGaming regulation. You sort of look what's going on with New York State some lost tax revenue. Can you talk about the potential for iGaming momentum in that state?

Sure, Jay. This is Richard Schwartz I'll start, and Kyle can add anything if you wish. In terms of markets, we are always looking to direct our capital to get the best returns, staying very disciplined on where we spend the capital and what our expectations are for results. So when it comes to a new market, every state or jurisdiction looks at it on a case-by-case basis, looking at the tax rates, looking at adjacent markets. We're looking at expected competitive intensity, opportunity for iGaming to be legalized in the near term versus long term in those markets. And then we look at data from our past launches to match our investments with our expected returns. And then at the end of the day, you'll see that our goal is to really make sure that we recover our investments on it relatively soon at a fast pace. And so when we look at all the modeling and the subjective analysis of the various opportunities in the market, we make a decision whether to enter and pursue that market or not. And so that's what we've done in Massachusetts, and we'll be doing the same thing in Kentucky. In terms of New York, as you know, states are looking at other states and watching the great tax benefit of legalizing eye Casino, where 75% of the revenues are being generated on taxes through those -- that product vertical in both online sports betting and unlike a snare both legal in the same market. We -- in terms of New York, we're excited we have a beachhead there, one of the limited licenses there for sports betting. We have mentioned before that profitability will be extended in that market for online sports betting alone on the basis of the high tax rate. But having said that, that's an incredibly exciting market for us and the industry, if I Games to legalize it, there are efforts, as you've read or heard to legalize in this last year, and there will be additional efforts, I believe, being made again in the next session. So we're actively involved in those discussions and are advocating for all-in game to be legalized in that jurisdiction given the size of the population and the fact that in that market, there's a Rivers brand that already exist as a casino brand. So we had a casino product to a casino a brand that's known as a casino in the same market. Obviously, it performs well. So we're excited for that.

Thank you.

Yes. No, we love that region. We -- as you know, we've had success in that market with Colombia and Mexico. We're really continuing to evaluate different markets down there. Some are in different states of legislation, some legislation pass, but regulation is not yet published. Others have both and are relatively small markets that might take some more time to grow. And so we have a team that's focused on leveraging this incredibly strong technology and leadership and operations we have in that region to be able to extend into other markets. We want to make sure we do it in a thoughtful way that's smarter long term, delivering the value for us. But that's a region that we look at the populations of Argentina and Brazil, which is another example of a market that is regulated. -- legalized online force betting hasn't yet regulated it, but there are some efforts to do so. So you can imagine we're very involved and active in that region and constantly evaluating what the best opportunity is for us to invest to get returns for our shareholders.

Our next question comes from Dan Politzer Wells Fargo.

First, I wanted to touch on kind of the EBITDA cadence. I know you guys kind of reiterated the second half of the year should be EBITDA positive. As you look at back historically and just in terms of the seasonality component, typically EBITDA improved from the second quarter relative to the first quarter. So given I think you printed $9 million of losses in the first quarter. Is there any reason to think that that's not going to improve significantly in the second quarter, given there's a lighter calendar in terms of sports?

Yes, I think -- so I appreciate the question, Dan. I think on the first part on the seasonality, there's been so many different launches during the last couple of years that it's -- I think it's hard to make a lot of seasonality and certainly for us, I couldn't speak for other companies, of course. But I think a couple of things to think about. Last year, we had the launch of New York in the first quarter, which actually had negative revenue, and we spent a significant amount in marketing there. So that's a big change from Q1 to Q2. Maybe I'll wrap in thoughts on revenue cadence with profitability cadence. I think I mentioned before, I think our Q1 came in about where we expected it to. Things are trending how we'd expect so far this year, obviously, still early in the second quarter. A lot of second quarter still to play out. I don't think it'd be unreasonable from a seasonal perspective to see a little dip in revenue from Q1 to Q2, given NFL playoff Super Bowl, March Madness, all in the first quarter and then growth again in Q3 and Q4. And then thinking about that relative to EBITDA cadence, we did very well in Q1 from an EBITDA perspective, certainly versus analyst expectations and also versus our own expectations as expenses came in lower and our gross margins were a little better than expected. So if you've got potentially lower revenue in Q2 than Q1 by probably some modest amount. We'll see how it plays out. We're expecting to spend a little bit lower in marketing expenses in Q2 than we did in Q1. So I think somewhere in the range of what we did in Q1 is fairly reasonable for EBITDA. And I think that's where, as a group analysts are today. And then you pointed out and we reiterated it again on the call, we do expect to be profitable for the second half of the year. So when thinking about the cadence, clearly, we'd expect it to improve from the second quarter into the back half of the year.

Got it. That's helpful. And then this is more of a high-level question, right? I think that you made the decision to exit Connecticut. I'm sure there was a lot of considerations that went into that decision. As we take a step back and think about your broader footprint, your broader exposure, the 15 states you're in and no iGaming getting past the finish line this year. Are there other states you're evaluating, maybe pulling back to the extent that, that could accelerate your EBITDA and profitability.

Right. So this is Richard. Yes, so we're comparing all opportunities globally, right, whether it's South America, North America, Canada, U.S., existing markets, online sports betting only existing markets with both and evaluate where the best use of our corporate resources are. We're going to get the strongest return. And so I think that our goal is to, as we said before, is to continue to improve our sportsbook experience, which we think we've done a really nice job of and to improve the way we market and promote that product to ensure that we get to a point of profitability, growing profitability in the sports book only market. As Kyle referenced, we did have a fast growth in the last several years after 2020, over 100% growth in the markets where our newer markets, which most of those have been online sportsbook market. So I would say that we are constantly evaluating the existing markets, new markets. And when we decide there's a change necessary, we will be happy to let everybody know.

Yes. I think the only thing I'd add, I think that there's -- it is an ongoing evaluation. This is not a point in time. I think Connecticut had some specific things about it that we're very particular and made it the right move for us to exit that market. So I wouldn't take that as a sign that there's a run on market exits in any way, but it is a sign that we continue to evaluate the opportunities and whether it's money well spent and whether the long-term returns are expected to be there.

Our next question comes from David Katz from Jeffries.

I wanted to go just a little further on -- with respect to Connecticut, where you talked about likely supporting them through the second half of '23. Is there any sort of time limit on it, just from the perspective that if you're choosing to exit it could potentially be hard for them to get somebody else? And does that leave you in there for a period of time when you're obviously making a lot of progress in most other areas.

Yes. So David, without getting into all the details of our agreement, the Connecticut lottery, they've been a great partner. It probably didn't work out the way we all expected, and that's why we're exiting. There is not a specific time frame. I know they're going through a process. They've made that public. We -- we're planning to support them through a transitionary period. Obviously, we don't know what's going to happen and who is going to be their eventual partner. We'll make sure that it's working out appropriately for us and that we've got the right protections in place for ourselves, of course. But I think we're in a good position now. We feel really good about where it's set up to be for the remainder of the year and then certainly as we're done with it at whatever point that happens.

Right. And then just my follow-up. With respect to iGaming, we've seen such product evolution in sports betting. And that's a part of -- offerings and part of customer education. Richard, can you just talk about sort of how iGaming is evolving as a product and where you think that is and where that puck is headed and how you're positioned for it?

Sure. Thanks, David. I came as an area I have a particular passion for and been in this sector for a long time. And what's interesting is that, in most cases, there's very little differentiation and innovation in the user experience for Casino. The reason is simple, most operators integrate content from third parties, and perhaps innovate or exclusively license or develop your own in-house content to try to offer something unique. But in terms of actually creating really innovative new-to-the-industry experiences that players like and are going to give you a reason to play with one operator versus another. I would say that we're in the very early innings of that development, although we are the leader in that space, and we have invested many years of developing unique features and functions in our casino experience. So players that play with our product realize really quickly that even though we might have some similar games to other sites, there's a whole lot of extra experiences that we've built in-house with a proprietary gamified promotional engine that creates an experience that's unique. And we have a community chatroom place to communicate with each other. We offer trivia games. We offer a real community tied up with other types of features that are unique to us and allow players to have incremental chances to win and play in fun games, whether it's a bingo game, an online slot time as we referenced earlier, whether it's a Batobbonus where the players had a bad streak and they deliver -- we deliver an amazing instant award to them in a 3D graphic animated character or whether it's scratch cards or wheel spans, we'd like to create fun additional functions on top of existing casino games, which does create experiences that are unique. So I think that direction that we've taken and pioneered has a lot more growth ahead for it, and we are racing ahead with all kinds of exciting innovation and developments into that area as we try to grow our profits in our casino business.

Our next question comes from Jordan Bender from JMP Securities.

Great. I want to go back to the future potential opportunities. Some of your competitors are starting to look to Europe and expand their footprint there. For you guys, your cash flow should start to inflect positive in the near future here. So is there any opportunity within Europe, either on the organic side? Or could you use your cash balance to kind of look to acquire something and start to grow your footprint in that market?

Sure. I mean, years ago, I started a run a business in the U.K., and I'm familiar with the European markets or our Chief Operating Officer of Mateus, also was the Chief Commercial Officer over one of the larger operators in Europe for almost a decade. So we have a lot of knowledge and experience in the market, and we are always open and considering opportunities. The opportunity in the U.S. is extremely large. And what we think is going to help us is to be very focused on the Americas. We think we have a head start in a lot of ways and certainly in Latin America in terms of the quality of the product, technology operations, the way we operate down in that part of the world. And as we're seeing, we're continuing to grow share in markets in the U.S., a market like Ontario or a very competitive market in West Virginia and others. So we think there's ample opportunity for us to focus on the United States and North America and continue to grow there. So while it's possible, we always evaluate organic opportunities elsewhere, we want to remain focused on the opportunity ahead of us, which we think is very significant.

Great. And my follow-up, I don't think you touched on it, but the gross margin, last call, you said it should improve pretty significantly in the back half of '23, just given kind of the 34% gross margin you did in the first quarter, should we still kind of assume that the back half of this year should improve materially over the first half?

Yes. So I think one of the things I mentioned is we probably expect a several hundred basis point full year improvement over last year, which puts the full year here in the range of 33%-ish, -- our margins in Q1 came in a little better than we expected. Fortunately, as I mentioned before, we've had more of our growth in some of our higher gross margin markets. It was -- came down to -- it does come down to the mix between your different markets and how profitable each of those markets are tax rates and then also mix of casino and sports. So we had a little bit of a beneficial mix in Q1. I do expect that the back half is likely to be as good or better than the first half. But I'd also say that Q1 was a little better than I had originally expected.

Our next question comes from Edward Engel from ROTH MKM.

You maintained your 2023 revenue guidance, but you also announced the pullback from elicit. Does that revenue guidance that you maintained factor in exiting by the end of the year? Or does it not?

Yes. Really great question. So we don't part of an answer to a question earlier. We don't know exactly when the Connecticut wind down is going to happen as we cooperate with the lottery in that process. But we're comfortable that the guidance as we have it today. That range includes different outcomes or time frames that, that wind down could occur under. So the guidance does include exiting Connecticut at some point.

And I guess on the back of that, does that kind of imply that the rest of the business might be doing a bit better than what you initially thought.

Yes. I think it's modest enough or the impact from Connecticut later in the year is not a dramatic impact on overall revenue. Certainly, it has an impact on 2024 revenue. But depending on the timing, it's not a substantial impact. But in the most absolute terms, yes, if we're some revenues coming out of that bucket, that means that there's more revenue in some other buckets. So probably a little bit there, but it's not terribly material.

Perfect. And then I guess a bigger picture, longer term, you kind of talked about high 20% margin this business kind of once we're kind of in a more mature state. Obviously, we're well, far away from there. But I guess, in the medium term, especially just given it's hard to know when new states are going to legalize iGaming. Is it possible for you to kind of get to that 20-ish percent margins with your current footprint? Or do you need a lot bigger TAM and just more safe to be glad to kind of even get close to there?

Yes. So - I don't think I want to pick certain points in time or exact number of markets. But clearly, we saw some of that operating leverage this quarter, a good chunk of it, right? And we expect to see more of that in the back half of the year. I mentioned a couple of times already, we're growing revenue faster in some of our higher-margin jurisdictions. So that's obviously good. We're seeing marketing expense come down as a percentage of revenue in many of our markets as they mature. We're still investing in our corporate G&A and technology teams, but we'll get leverage over that over the coming years as well. I think that to get to our target EBITDA margin we'll need some additional markets to launch or enter into. And certainly, having to include casino will be an important part of that. But I wouldn't want to pick the exact point in time or how many. We will, for sure, make progress and consistent progress towards that goal regardless of new markets launching, but it will help when they do.

Our next question comes from Mike Hickey from Benchmark Company.

Richard, Kyle, great job on your quarter. Just curious, I guess, one of your competitors here is seeking strategic alternatives to their U.S. business. It sounds like they've had some success. There's some interest. And apparently, they're pretty far along the process. They have access to 14 states to have a product. I think some of the challenges that they have is resource constraints. The feeling that consolidation in the market here is evitable, obviously, profitability challenges. So just curious how you guys think about your current situation here in this environment and whether it makes sense or not to pursue perhaps a similar strategy thinking sort of outside the box in terms of more aggressive alternatives versus seeing sort of independent a low share operator with constraints on...

Sure. I'll answer that question, Mike. So we're really proud of the business that we are developing. We've invested $280 million in capital to get to a top 5 position in the U.S. market with a lesser-known brand if we're being honest. So when you look at that, it's a pretty nice accomplishment. But having said that, there are opportunities that we have to always look at different partnerships and ways and approaches that might generate shareholder value in the future. So I think we have to be open minded about opportunities, but recognize that we have a clear path ahead. We have the capital to support that path. And we've been able to show that we've been able to grow and scale this business with substantially less capital than others have. So we feel very confident in our ability to continue to grow.

I guess the follow-up, obviously, you're pulling out of states here that I guess, from a high level, we're pretty important. -- market share eventually thinking about sort of Massachusetts and pulling out of Connecticut. Obviously, that's been a challenging state, but there's only sort of 3 operators with you guys. So I guess when you look at your business today, Richard, I think you were telling me you've got a great product. You've got access to all the key states. Now that's kind of going in reverse. I mean is this simply a database challenge for you a brand challenge? And if so, is there an opportunity for you to sort of align yourself with the database that can sort of complement the database that you have on the retail casino side to sort of, I guess, reset and drive business in online sports betting.

Right. So in the first minute going back to the brand, as I said just a minute ago that we don't have the most recognized brand nationally, even is not recognizable in some parts, some regions of the country, certainly at the same level as some of our competitors. But what we did to accomplish with that, it comes down to the quality of the user experience, the product, customer service and the way we treat our customers. One of the things that a great brand and business can be built over time, it's not usually immediate. And when you have a very loud high-intensity competitive environment, sometimes it takes a little longer to build that brand because it's hard to get the tension, although as we're seeing some of the intensity in terms of the variety of volume of unique operator spending has declined a little bit. But I would say that always having access to large databases, or a stronger brand or having more time to build that brand. It's certainly going to help us deliver stronger results in the future, and that's something that we're evaluating and constantly looking at ways we can improve how we're performing. But I would say that we have some examples where we show that we're going to grow share in whether it's casino or even sports food markets successfully, and we think we have what it takes. But certainly, we have to be very strategic and smart about which markets we enter, which ones we don't. It doesn't really make a lot of sense for us to spend aggressively to enter markets at this point where you don't think iGame is going to be legal anytime soon. where you have a very large competitive intensity, that's very intense, where you think you might get a very small share that might not be worth all the corporate effort to support and market at scale. If you don't think there's an opportunity in the nearer term to shift to online casino in that market. And so those are all factors that we look at. Do you want to add anything else...

Yes. I can start real quick. I think for sure, your point about Ontario and Michigan. Those should be nice growth drivers for us. We talked about on the call, Latin America has been growing really nicely for us even in -- with pretty decent currency headwind for us in the first quarter here and still grew very nicely down there. But there's also -- we're also seeing some nice growth in some of our sports book only markets. So I think it will be a little more broad-based than that. There's opportunities to grow in a lot of the markets that we're participating in. What I had mentioned earlier was that some of these -- a couple of the larger, more mature markets like Pennsylvania, New Jersey, Illinois, probably offer a little lower growth profile for us this year.

Yes, we're certainly looking at that. We think there's an opportunity. The rebrand was necessary. We think it was the right decision. It does take some time to rebrand it because a brand have been there since the beginning of our business, is the first real money gaming market we launched in many years ago. So it's going to make it more efficient for us. It takes some time to establish the new brand, but we feel it's the right decision. And we think that with the efforts we're putting into the casino category, there's going to be an opportunity for us to grow that market in the future.

Ryan, thanks for the question. In terms of the second part of your question and what that means to whatever next relationship happens that we're not part of that don't really have any information on that. And what have the impact Penisthere? Yes, correct. It doesn't have any impact on us. As we mentioned in the prepared remarks, there is no separation fee in either direction between us and the Connecticut lottery. There was -- as part of the initial announcement when we entered into that agreement. There was up to $170 million over 10 years that could go to the Connecticut lottery from us. That would include payments to the state as well dependent on how many how many retail locations were up and running, some other factors. But that's -- so whether that applies wholly, partially, not at all to the next participant, we wouldn't have any insight into that.

I guess just a clarification, Kyle, that $170 million, is any part of that guaranteed? Or was that just an estimate on revenue share over the 10 years?

Yes. So miles were $147,000 during the quarter. Excluding New York, so we have a large number of miles last year in New York. You might recall that impacted Armow as well. But excluding New York, our miles were up 3% year-over-year, including New York, they were down 3%. And in markets with casino in North America, it was actually up 11%. But in raw numbers, 147,000

Thank you. We currently have no further questions. I will now hand back over to Richard Swartz for closing remarks.

Thank you again for joining us today. We look forward to updating you on our progress when we share our second quarter results in a few months...