Good day, ladies and gentlemen. Thank you for standing by. Welcome to the RSI Third Quarter 2021 Earnings Conference Call. Please note that this conference call is being recorded today, November 10, 2021. I will now turn the call over to Lauren Seiler, Associate Vice President of Investor Relations and Development..

Thank you, operator and good afternoon. By now everyone should have access to our third quarter 2021 earnings release. It can be found under the heading financial 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 facts 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 upon them. We refer you to our SEC filings for more detailed discussion of the risks that could impact our future operating results and financial conditions.

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 2021 earnings release, which is available on the investors section of the RSI website at www.ruststreetinteractive.com. With me on the call today we have our CEO, Richard Schwartz; and our CFO, Kyle Sauers.

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, Lauren. Good afternoon, everyone. Thanks for joining the call. I have several topics I'd like to cover today. First, a highlight another quarter of record revenue and the raising of our full year revenue guidance. This quarter represents the ninth quarter in a row of sequential revenue growth for RSI.

Next, I'll give an update on Market Access Initiative and some exciting recent developments on new market opportunities. Then, I'll talk about our operational and marketing excellence.

And finally, a walkthrough product and technology rollout that are helping drive our differentiated user experience before handing it over to Kyle to dive deeper into our financials.

Once again, our team delivered another solid quarter of year-over-year growth as well as sequential revenue growth, demonstrating our continued ability to grow the top line while strategically investing in marketing technology areas that we expect will drive meaningful revenue growth and long-term value.

Revenue was $123 million during the quarter, representing a year-over-year increase of 57% which included revenue growth in all of our online casino and online sports for the market. With this continued success and growth in our business, we are once again raising our guidance.

We now expect our 2021 full year revenue to be between $480 million and $500 million implying 76% year-over-year top line growth at the midpoint. This is up from the previous estimated revenue growth of 72% of the midpoint of our prior guidance range. Kyle will provide some additional details in his remarks.

Before getting to recent launch, I want to first address the news I'm sure many of you saw earlier this week. We are thrilled to have been selected to operate our award winning online sports betting platform in the state of New York.

RSI has a strong track record of success in New York, overseeing the operations of the BetRivers sportsbook in Connecticut in New York. But New York isn't the only exciting new market to discuss. Subsequent to quarter end, on October 12, we announced the soft launch of the PlaySugarHouse online sportsbook in Connecticut.

The full launch occurred on schedule on October 19. And since then, we've been delighted to bring our award winning product and players to Connecticut as the exclusive sports and partner of the Connecticut Lottery.

We have subsequently launched four retail sportsbooks wagering locations in the state of Connecticut in New Haven, Stamford, and Windsor, all of which we all know are two weeks ago, and most recently, yesterday, we opened a sportsbook in New Britain. We expect another six locations to be opened over the coming weeks.

During the third quarter, we also announced a partnership with Arizona Rattlers as their partners of online sports betting in BetRivers, Arizona. And we were eager to launch BetRivers in that state during October.

We now operate real money gaming in 13 jurisdictions, five of which have online casino, 11 that have online sports betting and six with retail sports betting. We also announced that we've entered the Canadian market with the launch of our social gaming platform CASINO4FUN in the province of Ontario.

The free to play online casino and sportsbook is available now on all devices through the BetRivers platform. As we have shared before. We've had great success in markets like Pennsylvania and Michigan, with converting pre launch social players into real-money betters.

In fact, in Michigan, more than 20% of our pre launch social players have opened a real-money account and made first deposit. We are hoping for similar results in Ontario as we expect to launch real-money online casino and sports betting in the coming months.

We are really enthusiastic about the opportunity in Ontario, given the size of the market, and the ability for us to offer both online casino and sports in the jurisdiction. I can now shift and talk about market access.

While we have continued to make strong progress in launching several new states over the past year, we have also made significant strides in our new market access initiative. We are now live with online sportsbook and state representing 24% of the US population and live with online casino and states representing 10% of the population.

The anticipated upcoming launches in Louisiana, Maryland and New York will increase our sports of population by 9% up to 33%. And our entry into Ontario will increase our addressable population of online casino players by over 40%. Our business development team is working to secure access in future market.

We are excited to have put ourselves in a strong position already with market access plan in 21 online sports betting markets and 19 online casino markets. I now want to turn to some specific highlights from the quarter and exciting trends we are seeing. Connecticut is off to a strong start.

While it's still early, we've seen really solid progress thus far. Over the last two weeks in terms of the handle, Connecticut is already our third largest online sports but only market. In Illinois, we continue to hold share very well.

September data that came out earlier this week showed us with our largest share of close revenue in the last seven months. A great testament to user experience we provide and our ability to retain high quality players.

In Michigan, we have held steady with our online casino market share and I'm looking forward to soon able to offer our players an iOS app to remove friction and further improve the users' experience. In West Virginia, we've continued to grow online casino shares since we entered the market back in April. And we are now approaching 10% market share.

This is another market where launching iOS app for the first time will be exciting for our players, and we expect will improve player's satisfaction. Lastly, in Colombia during recent months, we are close to 20% market share of handle for combined online casino and online sports.

And we again grew revenue significantly greater than 100% year-over-year. This is a tremendous achievement, because our entry into that market several years after its first open. As I discussed earlier, there will be plenty of new markets to invest in overcoming quarters, which will put us in investment mode for the time being.

But we are proud of our ability to remain disciplined and calculated in the way we invest and ultimately generate substantial profitability from markets as they mature. Now, I would like to switch gears and talk about some of our marketing initiatives, investments and the results we have.

To start, we recently signed two new brand ambassadors to BetRivers and are great and respected tennis TV analyst James Blake and three-times to Super Bowl champion and NFL broadcasting veteran, Mark Schlereth. We are proud and happy to join other ambassadors as we create new and exciting betting content for players to enjoy.

We're also excited to have launched several hyper local sports betting podcasts in major cities across the country via our CityCasts programming, including in the city of Chicago, Detroit, Pittsburgh, Philadelphia, New York and Denver. Stay tuned for upcoming launches and many more cities in the future.

This is an effective way to use local talent, talking about local hometown teams to engage players and enhance loyalty because we know many betters refer to that on their local teams.

We've recently announced we've expanded our commitment to college football by signing exclusive partnership for betrivers.com with a The Field of 68 and The Field of 12 Media Network. These shows hosted by former college football and basketball stars offer our players unique insights into betting and college sports.

Our ability to market effectively is critical to our success. We remain a data driven organization using dynamic learnings and analytics to acquire, convert, retain and reengage customers. Real-time insights from a Business Intelligence Team allow us to continuously optimize our marketing spend based on the return on investment focus model.

This model considers a variety of factors including the price offered in the jurisdiction, performance of diversified marketing channels, predicted lifetime values, and behaviors of customers across various product offerings through efficiency of our marketing, we continue to see great results.

We still have an average payback period of six months for all of our cohorts since inception, the year one and year three -- times and 5.6x respectively.

Our marketing spend during the course of this year was 34% of our revenue, which we believe to be near industry lows, further demonstrating our ability to convert marketing investment dollars into top line revenue.

Given the strong results, we have accelerated our marketing investments and have extended payback periods slightly, only do so prudently with an eye on long-term profitability.

Now turning to product and technology; as usual, it's been a very busy quarter for technology and product development perspective here at RSI as we continue to focus on providing best-in-class user gaming experience.

We recently launched our own dedicated and branded live casino studios for players in Pennsylvania, New Jersey, which concurrently provide blackjack tables exclusively for BetRivers and PlaySugarHouse to make it easier and faster for them to find the virtual fee at popular online tables.

Our focus on customer interaction and community responsiveness continue to set RSI apart from other casino platforms. We are also excited to have recently launched RushRace, a proprietary multiplayer slot tournament for our casino customers.

RushRace is the first of many exciting experiences powered by RushArena, our innovative multiplayer tournament engine that will allow us to continue to stay ahead of industry and offer a differentiated product to keep our players engaged and excited to play on our platform.

We have also seen great interest in the same game-parlays feature we launched earlier this year. In fact, over 50% of our NFL betters this year have made it same game-parlay wager. When it comes to same game-parlay functionality, we have a significant point of differentiation from our competitors.

Unlike most of our peers, our players are able to combine multiple same game-parlays and even a same game-parlay with another game outcome, or even bet on a different sport. This gives our players more ways to combine that and create longer odds and bigger payouts.

Most offers another product differentiation that creates loyalty and retention with our players. We are also very proud to be recognized by Eilers & Krejcik for improvement to adopt for our new BetRivers app is now ranked number 3 out of 35 brands tested.

This is a strong -- from a respected independent source as we continue to improve functionality and user experience of our app.

As always, we pay close attention to the reception to our platform in new sportsbook and casino markets from first time users when they experience our significantly upgraded app in conjunction with the new features and award winning customer service.

We are increasingly confident that we have built in market leading sportsbook app, we also remain on track to begin to roll out of our integrated sportsbook and casino iPlus app during the fourth quarter.

As previously shared, our tremendous success in Pennsylvania and Michigan and recently West Virginia has all been achieved without an iOS app in those markets. We are really eager to see the benefit of enhanced player engagement through our iOS casino app we launch it in those markets.

I also want to take a moment to congratulate all the boys of Rush Street Interactive for being short listed for Casino Operator the Year by the SBC Awards North America, as well as being nominated as a Social Operator of the Year and the prestigious recognition by online gaming peers.

We are also very pleased to have won the Sportsbook of the Year by the 2021 SBC Latinoamerica Awards just a couple of weeks ago. These awards, as voted by industry experts are a testament to the efforts of the entire RSI team and a further recognition of our industry leading player experience. With that, I'll turn the call over to Kyle..

Thanks Richard. Before I dive into the numbers, there's one more very prestigious nomination RSI has been short listed for the SBC Awards North America that Richard failed to mention and that is Leader of the Year and very special congrats to him.

And as well as recognition of his hard work over the years in shaping RSI into organization it is today having taken the company from vision to fruition during a time when many doubted whether online gaming, would ever be a force in the US. Congrats to you Richard. And now on to some financial data.

As Richard mentioned, third quarter revenue was $122.9 million, an increase of 57% year-over-year. The adjusted EBITDA loss for the third quarter of 2021 was $12.2 million.

Adjusted advertising and promotions expense was $45.4 million during the third quarter '21 compared to $17.5 million in the prior year quarter, and $36.9 million during the second quarter of 2021.

This reflects our commitment to accelerating marketing spend to take advantage of strong returns, but also our rational approach to ensuring that put our marketing investments to good use. We expect marketing investments to increase meaningfully in the fourth quarter. The Football season is offered more opportunities to attract new players.

And our recent launches in Connecticut, Arizona and social in Ontario have also created an opportunity to further accelerate spend. Depending on launch time in other markets, we could have further investments in the fourth quarter or heavier into the beginning of next year. As we think about markets like Louisiana, Maryland.

Real-money in Ontario, and New York based on the exciting news earlier this week. Our adjusted G&A grew modestly from the second quarter to the third quarter, moving up to $8.8 million from $8 million in the second quarter.

We expect this line item to continue to grow in the coming quarters as we continue to build out our development teams and corporate infrastructure to support the substantial growth we're experiencing and continuing to expect over the coming years.

As a reminder, our adjusted EBITDA for the quarter were loosely effects of share based compensation, which was $4.5 million during the quarter, while our year-to-date results remove the effects of share based compensation, the change in fair value of earnout interest liability and the change in fair value of outstanding warrants which were all redeemed or expired during the first quarter.

We continue to be in great position with $347 million in under restricted cash on our balance sheet and no debt. This allows us to continue growing our marketing investments, launch a new market quickly, evaluate potential bolt-on acquisitions, and remain opportunistic with regards to external investment opportunities.

As Richard highlighted earlier, we are increasing our 2021 revenue guidance for the full year to be between $480 million and $500 million, up from our prior range of $465 million to $495 million. The revised range implies 76% year-over-year top line growth.

This is up from the year-over-year revenue growth of 72% that we were expecting on our previous call. We're seeing strong results across the business. And this increase reflects our confidence in the continued strong trends we've been seeing so far during 2021. We've talked about new markets that are likely launching later this year or early next year.

But as a reminder, our guidance only includes contributions from markets that are live as of today. And with that operator, please open the lines for questions..

The first question is from a line of Chad Beynon with Macquarie..

Hi, good afternoon, and thanks for taking my question. Congrats on the quarter.

With respect to the fourth quarter guidance can you elaborate a little bit in terms of what you've seen so far in October from a gaming competition, given some of the comments that we've heard from your peers? And given your approach towards disciplines promos, is this something that you're able to maintain given some potential irrational promos that we're seeing in the market? Thanks, guys..

Maybe I'll start out on just the guidance and how we thought about the fourth quarter. And then I'll let Richard maybe talk a little bit about just the competitive environment and in promos and the way we approach that.

So as we talked about, we raised the guidance by $10 million at the midpoint, pretty pleased that we're demonstrating the ability to set expectations and meet or beat them each time, a lot of different considerations obviously go into our range.

More of the variability is on the sports side, since consistency of handling volume is a little bit higher on the online casino business, which is a bigger part of our revenue. And the sports side, calendar looks a little different than last year.

We are obviously excited about all the sports that are happening and lined up to happen in the fourth quarter here. Probably not unlike what you've heard from others, October had a tough start with some low football for the first few weeks. It's gotten a little better over the last couple of weeks.

We've got two new state launches in Connecticut and Arizona that we're very excited about, as you know, and there's an investment early in market launches and promotions, really before any real revenue starts to be generated. So that probably a significant factor in either direction on the fourth quarter.

But having said all that, we're obviously excited to expect to have our 10th consecutive quarter of sequential revenue growth again here in the fourth quarter..

Hi, Chad. In terms of the --.

Yes, go ahead, Richard. I'm sorry, I interrupted..

I was just referencing the second half about the competitive nature of the market; I just thought I would just comment on that. The market remains very competitive as new entrants come into the markets and existing competitors increase their span and aggressiveness.

And so that we continue to perform well and we invested for years in developing all the elements of an experience that matter. So when it comes to your operations, your acquisition of players, your retention, those are things you can't just create overnight, or a couple of months that takes years of development and expertise to build out.

So we're very comfortable that we're prepared to compete. And we're seeing that we're continuing to have great results. And we think despite the competition, we operate with a very rational environment. We operate in a way that we believe is long-term focused on efficient, flexible marketing.

And I think we're seeing the results are still available for us because of the investment we've made in the past..

Great, thank you. And then my follow up just in terms of the iOS app launches.

Do you believe that that this will be incremental to the current desktop business? Are you expecting customers to kind of use both maybe use mobile for some more snacking and then stop for kind of longer sessions, just trying to think about the building blocks of your ARPMAU and I guess is mainly for '22 after the launches, thank you..

Sure, we know mobile is king and having a first rated app is helping us in sportsbook markets that we know is going to have only upside and provide us in the casino markets. The thing with the current setup is that you, our players are able to play on their iOS devices, but they really not very clear and seamless way.

And so by reducing friction from the user experience, we're going to deliver for them a much better experience.

And when you're betting on things like sports, and you want to be able to enter the app and do a very quick face ID getting their play, have it available on your phone very easily and accessible, have geolocation integrated into the app instead of where we have it today in those markets, be able to communicate with messaging directly to the players whenever you have an update or bonus or promotional offers.

So lots of benefits that brings an iOS apps as market is going to bring. But I will tell you that the number one thing is that it's the only part of our user experience in limited markets, we have some friction that we're very eager to get rid of..

The next question comes from the line of David Katz with Jefferies..

Hi, good afternoon, everyone. Thanks for taking my questions. I will admit I was a minute or two late, but I would love to just discuss the New York opportunity. Obviously the size and the scale the market, in view of the tax rate involved.

And how you're thinking about that financially and strategically?.

Yes, so maybe I'll start on the financial side. And if Richard wants to add anything, he can do that. But yes, I mean, certainly we'd prefer a lower tax rate. But we're definitely confident in our ability to generate profits in New York.

We think it's a market where competitors likely will be less aggressive with both marketing and promotions, certainly over the longer term.

And I think just given our success that we've proven time and again, with keeping markets low, and making efficient use of bonuses and promotions, it seems like New York, will play very well to our strengths as an efficient operator. .

Okay, and if I can just follow up on Illinois, right, the in person registration is canceling next year, as I understand it. If you could just give us a couple of updated thoughts about how you maneuver in that context, as well, that would be helpful..

Sure. We've seen the in person registration go back and forth a few times now. But what we have seen is that our market shares largely stay consistent. And in fact, just yesterday, the announcements came out -- the revenues came out, and we were the highest number we've been out in seven months.

So clearly, what excited about the market now is because you've had sort of the influx of new players slow down, you've been able to really see who operates well, in that market you've seen that we've been able to deliver really strong growth and market share even enhancements a little bit, especially most recently.

So when it comes to switching back off, in probably March or April, it appears or March. We are prepared for our products a lot better than it was before.

And we clearly have some strong marketing partnerships in place, including with the Chicago Bears, and we feel that we've been able to earn and retain the player trust in this market playing with our product.

So we're pretty excited to get to the chance to be able to open up the opportunity to increase the new player flow and be able to demonstrate to the players why we've been able to be so successful and stay with our products. .

The next question is from Ryan Sigdahl with Craig-Hallum..

Good afternoon. Congrats Richard on the nomination as well as all the other company nominations. Want to start with average revenue per monthly active user; it was up about 1% sequentially. But you have the benefit of the NFL season starting in September, I guess was the NFL incremental to our ARPMAU.

And secondly, I guess does that imply -- what does that imply for Q4?.

Yes, so good -- it's a good question and we talked a little bit about this on the last call I think but we actually expected our MAU growth to be a little slower in Q3 due to the sport seasonality in the sports calendar that spread across Q3 last year. So that's on the MAU.

And the fact is, we saw a pretty meaningful increase in users in September, the start of the football season, and that's continued, again nicely into Q4 in October and November. So I'd actually I'd expect the MAUs to move up pretty nicely in Q4.

And then adjusting for any sports seasonality, we'd expect the MAUs to continue to grow meaningfully over time and really be the larger source of revenue growth. But to your ARPMAU question, it's going to fluctuate a little more based on the mix of casino and sports and the launch of new markets.

And to your point, it actually, it probably didn't impact our ARPMAU a ton in Q3, because it was only at the NFL, because it was only part of the quarter, it will probably pull it down more likely in Q4, because we'll have an influx of players who are lower ARPMAU than our casino players.

And then add to that the fact that we'll have a bunch of new players in Arizona and Connecticut that will be incremental to the MAUs, but won't be generating as much revenue in those new markets because of promotions..

Helpful. Thanks, Kyle.

On Ontario, you launch CASINO4FUN few weeks ago, any early user metrics you can share there?.

Yes, there really aren't any metrics that we're sharing. But I think the key is to that market opportunity to build our brand and build those databases early. We're learning a lot about the market, making sure the registration flows are right, and making sure we're getting everything ready for the time when the market opens.

Because obviously we've shared before we expect that to be one of our largest markets for next year..

Great.

How does the brand I guess building the brand using CASINO4FUN relative to your other real- money brands? How does that resonate with customers and consumers?.

So we're actually using the BetRivers brand in that market. So the platform is referred to as CASINO4FUN platform, but it's actually the BetRivers brand being utilized in a market. So since the intent is to use that brand in Ontario, we then are investing right now and building a brand with years.

So there is a nice awareness in the community and the consumers in that market to the brand at a time before others are really investing the same type of dollars in that brand awareness..

That makes sense. One more on the social casino, revenues plateaued the last three quarters here. Can you remind me what states you guys are live in there? And then also as you convert those to real- money, which I think you said 20% if I caught that right? Do they keep playing on both? Or is that effectively good churn there? Thanks..

Right. So we're not really investing dollars in building out a social platform other than using it as a real-money acquisition opportunity as we described, we're doing an Ontario right now, we did previously in Michigan. And before that, in Pennsylvania, you heard that data point right about a 20%. Certainly, that's an exciting number.

I think historically, people would expect it to be under 5%. So the fact that we're generating that kind of conversion rate, I think the real validation of a strategy that works well for us.

Having said that, there are some players that are switching between back and forth between the two, we've heard quite a few players when they feel like they want to be responsible with their budgets, or they feel like they spend their budget or annual budget, they basically switch to the free play model to engage with a product experience at a more entertaining level without any risk.

So we do see that players do go back and forth between the two of them. But we do know that generally, the direction is to convert those players from social to real-money when those markets are legal..

The next question comes from the line of Jed Kelley with Oppenheimer..

Hey, great. Thanks for taking my question. Just back on the Illinois numbers. You mentioned your GGR was the highest expenditure in quarters.

Can you talk about the impact the same game-parlay had on that performance?.

Sure, it's a pretty meaningful; I would say the overall app experience improvements, probably even larger driver. Why I say that is that we've gone through before all the improvements in mainly app and it's just a tremendous amount of improvement for the price getting better and better.

But having said that, same game-parlay is a valuable tool as we indicated over half of our players is better since football season have used it. We haven't differentiation in our product that we're really excited about.

Also traditionally, most single game-parley products in the competition really are limited to one game and can't really parlay those, you can -- other bets from other games. So if you want to bet on a Brady and the bucks, you bet the bucks to beat the spread and Brady for over 300 yards that would be the extended same game-parlay.

We allow those players to not only that parlay that they want; they can combine that with green bay packers to be the spread. And Rogers --.

He's got COVID-19; it's okay..

He's a went up. Rogers go through the yards, as well so. Right, so we can combine same game-parlays. And one parlay to same game-parlay against any other bets or any other sport. So that nimbleness and the fact that we're also opening up for college football same game-parlays, which is really exciting.

A lot of fans like to bet on their favorite teams to win, beat the spread and maybe play a prop. So we've been adding quite a few more of those to the offering. So it has been meaningful. It does even the playing field.

And as I just said with the competition only evens the playing field, but actually in some cases has accelerated our ability to differentiate in that critical area..

And adding the extra game to single game-parlays that being done through your own technology or partnering with Cambie, I mean, who's calling -- are you calling that?.

Right. So we are leveraging that can be spending engine for that. And one thing that we noticed the big benefit is that some companies are outsourcing the same game-parlay from individual companies to help sort of supplement their existing core offering.

But when you do that you're really limited in your ability to cross-sell do multiple parlays, because you have the parlays coming from different sources. And you have two different platforms providing you a source but not organic, you can't really settle a bet as quickly.

And you can also allow you to do what we're doing, which is to sort of have multiple bets and extend the odds of other betting for the players. So it is driven in large part by -- Cambie but we have integrated it and the way we unify the system, it makes it, so it's pretty seamless for user experience..

Got it. And then just two more you sort of see the success that Michigan's having with i-gaming. The numbers are phenomenal.

I mean, where are we with neighboring states such as Indiana and Illinois, potentially legal AI gaming? And then back to New York, I mean is there any way you can leverage your Connecticut property when you enter that market? Thank you..

Sure, so I-casino is exciting categories you know, we're seeing a lot of opportunity mentioned in the Midwest, which is convenient for us, given our location and Illinois and Indiana, two buckets that come to the top of our mind in terms of future markets that we think are showing some evidence of bills being dropped.

And just last year, there were bills dropped in Indiana and Missouri as well. And Illinois, we've seen some opportunity, I think, for those markets to move. So clearly that revenue success of casino category vis-à-vis sports betting category is given the state's extra fodder to really decide to move forward in that direction.

So we're continuing to monitor these markets and lobby where we can to help encourage an accelerated rate. The nice thing about this is for the first time really in years, our competitors are really all reaching out to each other trying to focus on getting this category moving and legalized and regulated. So there's a lot of positive momentum.

I think it's just a matter of time before a few additional markets start to open up. In the meanwhile, we're very excited that Ontario, a large, which will be the largest population of any online casino market in the US if it was a state is going to be opening up for us in the near future. So we're excited to have another casino market on the horizon.

And close to -- sorry, in terms of New York, yes, we are working with the property and on the opportunity to leverage some of the player base as we've shared publicly, of all the four commercial casinos in the states that property has done the best in terms of commercial sportsbook revenues for the retail side, and that's not necessarily a given that it should perform that well, because it's not the largest land based commercial casino in the state by revenue.

So it has a nice database and there's a plan to work with them to market our brand online in that state as well..

The next question comes from the line of Bernie McTernan with Needham..

Great, thanks for taking the question.

Richard, just given the movement in stock, can you remind us of your M&A framework, any holes that you want or need to fill that you could maybe take advantage of given your equity is now worth more?.

Sure.

So we're -- we have really what we need to be successful long term and its market, we needed the market access, which we've shown, we have that in all the markets that matter, have our own in house technology to drive the results that we're seeing strengthen casino category, which is something that a lot of companies don't have the same quality of product that we do, and then just the scale that we have to really to do some investments and be able to justify some of the larger opportunities ahead of us.

Things that we've mentioned that we continue to want to look for is diversification in our product portfolio, find ways to bring into other product category. There are some opportunities there, we think, potentially that we're always looking at.

In terms of the future, I think we're brought up in a lot of discussions all the time, because we have these great assets that are valuable, but they're valuable for us to be able to utilize to grow the business and the industry.

So we're always open minded to explore all options, including companies that we may look at to help improve our opportunity, whether it's with brands, or databases or product verticals will be the three categories that I think are most greatest interest to us..

Got it and then for Kyle, comments on the heavy marketing investment in 4Q, just wanted to see if you could provide any color on if you expect the EBITDA loss to be wider in 4Q relative to 3Q..

Yes, thanks. So yes, as you point out, we mentioned in the prepared remarks, we do expect that the marketing expense is going to move up pretty meaningfully in Q4 from Q3.

I would expect that the given our guidance range and given the expectations currently for how some of these new states might launch and how we're spending it in Connecticut, Arizona, the increase in marketing spend in Q4 would outpace the margin benefit that we get from the sequential increase in revenue.

So that probably means we're losing more in the fourth quarter than we are in the third quarter. And just thinking more about the increase in spend, and I commented on some of it, but you've got the Q4 sports calendar.

So little heavier marketing related to football, trying to attract new players and all the states that were in the Connecticut and Arizona launches. And that's always an investment when you launch in new states.

And then really the other upcoming launches that we've talked about on the call, it's really going to depend on the ultimate timing of those when the states and the regulators are ready. So that'll impact how much we actually spend in Q4, or even into Q1 next year, I would expect both Q4 and Q1 to be bigger than Q3.

But to your specific point, I'd expect that spend is bigger in Q4 and marketing, and that is bigger such that the loss would be bigger in Q4 than it was in Q3..

The next question comes from the line of Stephen Grambling with Goldman Sachs..

Hey, thanks, maybe that's a good place to jump to just any updated thoughts on the path to profitability in any kind of puts and takes to consider along that path?.

Sure, I'll take that one. And the good news is we're already operating profitably in quite a few markets. And we've demonstrated ability in the past to operate this business profitably.

I think that it's going to depend really largely on the pace and timing of rollout of new markets, sports and casino and what the competitive situation looks like, in those markets. And obviously, there's a lot of commentary around that.

And we have competitors that are behaving in different ways in different markets, but it's definitely competitive at this point, both in terms of promotions that are offered and outright marketing dollars that are being put to work. And we're operating in an environment that's aggressive, and we're really doing well.

And our revenue guidance has us getting near 500 or to $500 million this year at the top end of our guidance, which should make us the fourth largest operator in the market. So the near term, I'd say we don't expect profitability here in the near term, but we're going to continue to invest in all the new markets that we've talked about today.

Hopefully, we're going to see a bunch more they get approved over the next year or coming years and we'll continue to have opportunities to invest in and while markets more markets mature, and eventually we'll have less new approved states that are part of that mix, we're highly confident we're going to demonstrate strong profitability.

But I think we'll wait until there's a little more clarity. When it will slow down or when we'll have less markets, new markets to focus on before we forecast timing for profitability..

Got it, makes sense. And then maybe changing gears in the markets where you have i-gaming and sports betting, any sense for what the split is in either revenues or users as we look at i-gaming only versus sports only versus the overlap, and how perhaps the path of customer acquisition may be evolving..

So we haven't broken out the split states, we have shared in the past that overall, our mix is, has over several quarters, let's say it's run between two thirds and three quarters casino. And we were near the higher end in Q3, but that's also probably reflective of the sports calendar.

So I might expect that to shift a little bit towards sports in the fourth quarter. And the other thing we've pointed out is that in terms of revenue and value that's generated from our players, that a casino player is worth something like five times what a sports only player is, and someone who's in both is even two times more value.

So there's a lot of value to those states where we have both types of players. So it's one of the reasons we love markets like Ontario, that'll be going live here shortly. And we expect that to be a big contributor..

Make sense. And then one last one, just to clarify, I think you have this slide in the deck that shows different cohorts. You referenced this last quarter, but I just want to make sure that I understand kind of what's going on there. The 2020 cohort looks like it still has been softening.

So I guess what's driving that? And will that eventually reverse out?.

Yes, I think you and I talked about this call three months ago. And it's actually it's a good question and a fair one. And it's really mostly about Illinois. And there are two things at play here that I'd point out. The first is that we had a head start in Illinois, as everyone knows, before some of our competition entered the market.

So part of that is just sharing the market with others from part of the 2020 cohort of the acquired players there. And that -- so those were helping the chart back in 2020 and early 2021. The second piece, which should reverse itself, to some extent, is more seasonal. So a lot of the acquired players in 2020 were from Illinois.

And that's a sports only market. So that means we'd expect to see a benefit from that Illinois 2020 cohort in the fourth quarter..

The next question comes from the line of Daniel Politzer with Wells Fargo..

Good afternoon, everyone. And thanks for taking my questions. So first, just the promo stand, I wanted to drill in a little bit. One of your competitors recently said there's a misalignment between CAC and LTV, and basically they're pulling back.

I mean, as you've seen this level of competition and promotion certainly increased over the last few months, I mean, to what extent your strategy pivoted or changed over this time period..

So we're still running at around six month payback. Similarly, since inception of a business over the last couple months of cohorts, we've seen increasing little beyond that. So there isn't additional competition edge, but we are seeing that return on those players in a faster time period. And we hear others are announcing.

So I think it comes down to having strong conversion rates and retention rates. Because if viewers' conversion rates up, you're going spend that money and marketing efficiently get those players through the funnel and get them registering and making the first deposit.

And of course, once they're there, how you treat them and how well they like your experience you offer is going to get those retention numbers, which are going to drive up those LTVs.

So I would just say that a lot of companies in the space are spending a lot of marketing and aggressiveness, but they don't have the product down to where it needs to be at in our view to be at the world class level you need to be competitive here. And you can get the product right you have to get the service right as well.

So I think it just comes down to the ability to execute at a world class level on both the product and the service side to be able to deliver results.

If you're missing one piece of the puzzle, you're not delivering consistency across all interfaces with customer; we do have a real risk of not getting back that invested capital and needing to take some more time to probably mature the product or the service to get to the point where you are going to get those returns..

Got it, thanks, Richard.

And then just follow up to what extent can you just give any color on Connecticut any early signs, and maybe the competitive environment there given it's effectively an oligopoly, and maybe how that that is compared with other markets such as Arizona that recently launched?.

Right. So Connecticut's really exciting, it's as you know only three operators have licenses, including us, I think what you'll see is FanDuel and DraftKings are to the other competitors, and they have the large database starting out, and we expect them to jump off to a pretty strong lead in their positioning.

But as we share on this call, we are very happy with a start in terms of our ability to already have the size that we have there being one of them alternately being live for a few weeks already, as we mentioned earlier already at the top three, five for us in terms of online sports with only markets.

Because seven of those markets have number three already after only a few weeks.

So it shows you we have scale there and opportunity to grow up, I think what's really exciting on the market is, over time, we're going to be able to really grow out because players are going to try multiple sites and only have three, they're going to try our site and the thing to notice the difference in how we treat them when they try our site.

On top of that with a great partnership with Sportech and the Connecticut Lottery with having all these great retail locations that are opening up around the state. We actually mentioned yesterday, there was a fourth sportsbook open and two more actually opening tomorrow.

So we'll have a total of seven sportsbooks opened by the end of this week on the retail side and three more coming soon after.

So when we -- and once those are opened, we're going to work very closely with our partners there to drive traffic venue to the online site, I think it's going to be a really useful strategy that will be successful based on seeing that strategy use in other markets.

So we think it's going to be, Connecticut will be market where we may start off and just keep growing over time because we think that we have an opportunity to really put those assets to use in a way that will be really unique for us in that marketplace..

Got it.

And then just one quick housekeeping item and I thought if I missed this, but did you get Columbia revenue for the quarter?.

We did not get exact Columbia revenue. That'll be -- it'll be in our 10-Q, it grew more than 100% compared to last year. But it's somewhere a little south of 10% of revenue..

The next question is from the line of Edward Engel with Roth Capital..

Hi, thank you for taking my question. I was wondering is there -- has there been any interest in launching or in licensing, or trying to make an agreement and to license a third party brand that might be more widely known in sports fans, and then maybe use that philosophy that's a complementary sport for product. .

So we have two great brands that we use in the United States. And they're both regional and national in nature; BetRivers is a little more national. The SugarHouse brand is really regional; it was expanded from New Jersey to Connecticut.

And at the end of a day, we looked at all options to consider everything, though really thought about as we've proven that as local nature of our local marketing local brands really resonates a lot with something that we are very comfortable.

The current strategies working that Kyle referenced earlier, remember four online gaming revenues and the country spending a lot less than others to get to that level. And we feel that as a company, we always have to evaluate all options available.

But having said that, we're very comfortable and very excited by its ability to continue doing what we're doing..

Great, thank you for that. And then just given some of the success that you've had with some cross-sell in i-gaming, some of your social gaming customers.

I was just wondering, do you think there's a an opportunity to make an acquisition on the social gaming side, which would may be give you access to even larger database to target with i-gaming products?.

Yes, certainly an interesting idea that we've definitely discussed internally, certainly a worthwhile idea if you can find a product that appeals to a casino demographic. Certainly, that's something that could be a nice fit with a company like ours, but you certainly have to look around for all the different options there.

And we have a really strong business development organization that evaluates those kinds of opportunities. And those are things that I think are could be relevant in the future if you look to build databases, which is something that I mentioned earlier is something that we definitely would benefit from..

The next question is coming from the line of Mike Hickey with The Benchmark Company..

Hey, Richard, Kyle. Congrats on that quarter guys, thanks for taking my questions.

On Canada, just sort of curious how significant the gray market is there? And how competitive the operators are?.

Sure. That's a great question. And I think it comes down to really no one knows the answer for truth. No one really knows the answer and the scale and size, what we do know is that most of the market historically there has the gray market is really focused pretty heavily on the sportsbook side of things.

So certainly, I think there's going to be some players already in databases of platforms, and they also be competing in the core regulated market.

On the casino side, though, one thing we're excited about is ability to really promote the social casino product there, it's an audience who may not be as familiar with a casino brand, as we're focusing on the casino category, get players early exposure to the type of experience that we have, in a strange way, Michigan was the opposite.

Well, Michigan had a very large retail database from several of the operators there and right away saw those players come online, the question will be how much of the gray market sites that are able to transition without any sort of delay, you've seen in some European markets.

Some of those European markets delay the ability to kind of launch a gray market site into real regulated market here, there's going to be a little delay.

So I think it's going to be interesting to see how many of those brands do cross-sell to the sportsbook real-money marketing, but I think the advantage we have, as I said is that the casino category really hasn't been one that's been heavily promoted in that market in the past and nowhere near as much as sportsbooks.

So for someone like us, who obviously is very attracted to the casino opportunity there, we think the market will be exciting for us..

Nice, thank you, just to clarify the existing operators, you would anticipate that they in fact, with the provincial licenses, then as opposed to sort of staying under their current construct that sort of where did they -- can they stay sort of in the gray market and continue to compete?.

Well, it's kind of hybrid, my understanding is they will actually be able to convert from the gray market to a regulated legal market environment by applying for same license that us that we will be applying for..

Okay.

And then in New York, are you able to leverage the rivers retail casino their in terms of the database or 90 other opportunities to sort of given advantage in that market?.

Yes, the plan is to do so..

All right. Last question. You said 20%, sharing Columbia, you're late, you sort of arrived on the scene late, you've had a lot of success, and does that sort of encourage you to look beyond Columbia and sort of the broader Latin America landscape for sort of expansionary growth. Thanks, guys..

Thanks.

Yes, it does really -- it does give us extra confidence and validation that our strategy of going into that market and not giving it a short focus and not being short term focus are really building out the product, localizing it, localizing the teams, developing strong leadership teams, and really preparing ourselves for the next phase of expansion.

We were correct when we anticipated years ago that market would be one that would have a great opportunity for growth, but also be a stepping stone for other markets in the region. Since then, you've seen Brazil's legalized sports betting, the regulations are still being worked on.

We're hearing some rumors that may be nearing conclusion, which should be positive, Argentina has been legalizing, Mexico's legalizing, and we're talking about large populations.

And what's exciting is that the payment vendors, the banks, we use the location providers, teams, the products, the language of the site, all the things that we invested heavily in are going to work really well for those other markets.

And so we think we have a real advantage to be able to take the success we had in Colombia and explore that or really leverage that to other markets in the region. So I would say that the answer is yes. That's an area of high interest for us the region.

And I think the strategy go there early and really build a technology that market on our same platform that we're going to use for other markets, was really helpful, a lot of companies now they kind of come in the market late or looking to buy local companies there.

But then you have local companies already on their own platforms, different from the long term global platform of the operator. These sounds exist, co exist with different platforms, which creates larger efficiencies.

For us, we are confident that when we do go to other markets in our region, that obviously will be the same platform that we use globally which will create a lot of efficiencies for development organization and making sure the marketing between all the different markets are all utilizing the same tools.

So we're really excited for that region in the future given a success route in Colombia. .

There are no additional questions waiting at this time. I would now like to turn the conference back over to Richard Schwartz for any closing remarks. .

Great questions. In closing, I'd like to repeat what I shared last quarter. I know time in our history at RSI have I've been more excited about how strong we are in positions of exceeding the dynamic industry. We are strong and we are growing stronger by the day.

We'll continue to successfully gain market share across new markets including very heavily contested ones like we just experienced in New York and Connecticut. We have ample growth opportunities ahead of us. For example, in the last six months, we entered two markets, Arizona, Connecticut with a population of 11 million people.

In the next six months, we're going to enter Ontario, New York, Maryland, Louisiana, which is about four times the population of 45 million people in these markets compared 11 million in the last six months. So a lot of growth is ahead for us.

We continue to demonstrate our ability to grow top line or remaining flexible and prudent and how we invest in marketing. And when the rest of the industry begins to rationalize how they market and bonus players, we believe we will have a sustainable competitive advantage as nothing would change for us as we're already operating rationally today.

This is why the best is ahead for RSI. Thank you for joining RSI third quarter 2021..

That includes the Rush Street Interactive Third Quarter 2021 Earnings Call. I hope you all enjoy the rest of your day. You may now disconnect your lines..