Good day, ladies and gentlemen. Thank you for standing by. Welcome to Rush Street Interactive Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference call is being recorded today, November 02, 2022. I'd now turn the call over to your host Lauren Seiler, Associate Vice President of Investor Relations and Development. You may proceed.

Thank you, operator and good afternoon. By now everyone should have access to our third quarter 2022 release. It can be found under the heading Financials Quarterly Results in the Investors section of the RSI website 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 a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 2022 earnings release and our investor deck which is available in the Investors section of the RSI website at www.rushstreetinteractive.com. With me on the call today, we have Richard Schwartz, Chief Executive Officer; and Kyle Sauers, Chief Financial 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, Lauren. Good afternoon, everyone and welcome to our third quarter earnings call. We're pleased with our results and remain focused on acquiring and retaining players, a level that is consistent with our plans to achieve profitability. We are accomplishing this by continuously advancing our proprietary platform and offering a world-class user experience. We made fantastic progress towards our profitability goal of being EBITDA positive for the second half of 2023 through a combination of solid revenue growth, disciplined marketing spend, improving gross margins, and modest growth in our corporate G&A costs. Revenue for the third quarter was up 20% year-over-year at $148 million. Two items to keep in mind as you evaluate our results. First, in online casino, our hold rate was lower than normal and as a result negatively impacted revenue during the quarter by an estimated $4 million. Second, given the macro environment, we experienced foreign exchange headwinds that impacted revenue in both Colombia and Canada. We estimate foreign currency movements negatively impacted our revenue by approximately $2 million during the quarter. Absent these two headwinds, our revenue would have been within the range expected by the street. Looking at adjusted EBITDA, we posted negative $12.5 million, a considerable improvement compared to last quarter's negative $18.6 million. We remain profitable in the six markets of New Jersey, Pennsylvania, Michigan, Illinois, West Virginia, and Colombia. We also made significant progress in our nine sportsbook-only markets, with the aggregated loss from those markets being less than $5 million during the quarter, representing less than half of what we lost in those same markets during the second quarter. These sports-only markets benefit from the lessening impact of new market launch costs, growing revenues as markets mature, and lower marketing costs as a percentage of revenue. As for the remainder of the year, we are revising our revenue guidance range to between $580 million and $600 million, which reflects the impact of the third quarter's lower than normal iCasino hold, foreign exchange headwinds from Q3, and anticipated for Q4, as well as the impact of our disciplined marketing spend in the third quarter. With that, I want to shift to market insights and provide some thoughts on a few of our markets. First, at a high level, we continue to see strong volumes in markets where we are live with both online casino and sports betting. It remains a simple fact about our business. The online casino vertical is significantly larger and more profitable than sports betting in the markets where we are operating both. This is why our business model, including our platform design, functionality, and our approach to marketing and operations is driven first and foremost by our deep understanding of digital casino customers. Across our online sports-only markets, we grew total revenues year-over-year in our existing states and also had a significant revenue contribution from the four states that launched after the third quarter last year. This is even considering our more measured marketing approach where we work to attract high-quality customers and retain them with a world-class user experience as opposed to incentivizing short-term behavior. Internationally, our efforts in Ontario are progressing very nicely. The fact that this is an online casino and sports betting market plays to our strength. This was the first full quarter of being live, and we are pleased with our ramp and overall market share. To put some numbers around our success in the almost two full quarters of operation in Ontario, our market share has been approximately 7% for iCasino and 2% for online sportsbook. Given the number of competitors in the market and the advantage some of our competitors began with in terms of existing high brand awareness and access to online player databases, we are pleased with the success and hope to continue to build upon that in the quarters to come. Turning to Mexico, this was our first full quarter of operations there. We remain enthusiastic about the market opportunity. As previously shared, we are taking a very deliberate and measured approach. We remain focused on building a strong foundation that will provide stable long-term growth and profitability. We are continuing to work with and leverage our media partners to build brand awareness and further localize our platform and user experience. This is similar to how we started in Colombia. With this in mind, we expect to see a more significant contribution from Mexico beginning towards the back half of next year. That said, we are pleased with how it's going thus far. Looking ahead, Maryland is another exciting market where we are preparing to launch online sports betting whenever approved by the regulators. As a reminder, we just recently launched a retail location in the state with our partners at Bingo World, which is located in Baltimore right off the I-95 corridor with strong visibility. We are also excited about our plan for an early January launch in Ohio, especially given the demographics, sizeable population, and adjacency to four other markets where we are already operating the Bet Rivers sportsbook. Due to the media overlap between the adjacent states where we already operate, we expect Ohio will improve our marketing efficiencies. Turning to marketing, our approach remains data-driven as we are investing in customers at what we believe to be viable levels. In other words, we look hard at what we spend and what we get. We won't target market share. Rather, we continue to focus on earning and retaining customer loyalty by treating them well, being thoughtful, developing seamless experiences, and reducing friction at every possible interaction point. Our marketing efficiency continues to improve, validated by our cost per player in Q3 being down by over 50% from the same quarter last year. Looking forward to Q4 as we head into the winter months, we have allocated increased marketing spend to our casino markets. We've also increased marketing spend in New Jersey to support our rebranding of BET Rivers in New Jersey since we had previously pulled back marketing spend there in anticipation of the rebrand. As new markets continue to launch, we will remain mindful of which markets to enter, the need to acquire players at a reasonable cost, and focus on retention and customer service. We have built our platform and culture around this philosophy, and we believe it is paying off on our movement towards profitability. When it comes to product and innovation, we've made significant advances once again in this quarter. In addition to the efforts in localizing the player experience in Mexico, rebranding in New Jersey, and preparing for launches in Maryland and Ohio, we've added a lot of great new functionality to excite users and keep them returning to the platform. Heading into the football and basketball seasons, we have significantly expanded the menu of betting options for our players. We have single-game parlays for basketball for the first time. We've made our parlay bets more attractive by expanding the number of legs that can be bet on, and we have a great selection of new player props including for in-game betting markets. In addition, we've enhanced our staff integrations with a widget that provides statistics integrated seamlessly within our betting views for all the major sports leagues. We have also developed, internally, a new patent-pending squares game that will launch later this football season that I'm particularly excited about. Even if you've never placed a sports bet in your life, you've probably participated in a squares pool game in conjunction with watching the Super Bowl. We talk all the time about how we find ways to delight players and give them unique ways to engage, win, and have fun with our platform. Players will be awarded squares based on their activities and bets and will win prizes when their numbers hit. Just like the incredible success we've had with online casino innovations, we are creating more ways for people to win and giving them more reasons to keep coming back to the platform. With that, I'll turn the call over to Kyle.

Thanks, Richard. Third quarter revenue was $148 million, up 20% year-over-year. As Richard mentioned, there are two items affecting revenue this quarter, and they're worth noting. First, in online casino, we had lower hold during the quarter, and while iCasino does not typically experience the same volatility in hold rates as online sports betting, we had our lowest hold since early last year, which negatively impacted revenue by an estimated $4 million. Second, we experienced an elevated level of foreign exchange movement in both Colombia and Canada during the quarter. All in, foreign currency movements negatively impacted our revenue line by an estimated $2 million. This continued currency headwind is built into our updated guidance for the remainder of the year. It's important to note that the vast majority of our operating costs are denominated in the local currency for the markets in which we operate, so gross margins are largely unaffected by any currency fluctuations. We continue to see positive signs in player acquisition and retention, as measured through monthly active users. Third quarter MAUs were 130,000, up 31% year-over-year, and equally exciting is that September MAUs were up 40% year-over-year. The increase reflects our successful efforts in player acquisition and retention across online casino and sports betting, plus the addition of new jurisdictions compared to the same period last year. In terms of player engagement and monetization, ARPU was $345 during the third quarter sequentially. Third quarter ARPU was up a bit over 6% from where they were in the June quarter, and this follows a 23% increase in Q2 compared to Q1. As we moved away from the initial New York launch, these consistently higher ARPU numbers continue to reflect strong online casino results and the high-quality players we attract to our platform. Starting about a year ago, we entered a string of new market launches, which required significant investment. As we're now about a year out from the beginning of this cycle, we're able to begin to see some benefits in our cost base. As Richard touched on, we continue to target adjusted EBITDA profitability for the second half of next year. Our third quarter adjusted EBITDA loss was $12.5 million, much improved from the second quarter, which in its own right was vastly better compared with the first quarter. Adjusted advertising and promotions expense was $44.7 million for the third quarter, up only 1% compared to Q2 and down 2% from last year's third quarter. We continue to find ways to efficiently and creatively put our marketing investments to work as evidence by lower marketing costs and strong MAU growth. We remain committed to spending rational amounts to acquire players, monitoring the value of those players and the channels through which we acquire them. Investing more when we see solid returns and reducing or eliminating marketing where it doesn't make sense. Having said all that, as Richard mentioned, we spent less than we originally anticipated during the third quarter, and we expect our marketing costs to increase sequentially in the fourth quarter, but they still aren't expected to be as high as the fourth quarter of last year or Q1 of this current year. Our gross margins improved again sequentially in the third quarter, and we expect them to continue to improve further during the fourth quarter. Adjusted G&A costs decreased sequentially in Q3 to $12.7 million during the quarter. This is down from $13.5 million in the second quarter. We continue to make prudent investments in the growth of our corporate and technology teams, so we expect G&A to continue to grow modestly over the coming quarters. Turning to the balance sheet, we ended the quarter with $195 million in run unrestricted cash on hand and no debt, and our balance sheet positions us well to comfortably get to adjusted EBITDA and cash flow positive. Looking at the rest of 2022, we're adjusting our range on our full-year revenue guidance to be between $580 million and $600 million. This change reflects the impact of the third quarter actual results, foreign exchange headwinds anticipated through the fourth quarter and modestly lower growth in Q4 due to lower marketing spend than originally anticipated in the third quarter at the midpoint of the current range. This implies revenue growth of 25% for the fourth quarter. As we continue to balance our path to profitability with revenue growth, we're very pleased with our progress here to date. For the full year, we expect to see lower losses and a stronger cash position than we had anticipated at the beginning of the year. We continue to execute well, continuing to grow the top line consistently while managing our costs appropriately. We have almost $200 million of cash on our balance sheet, no debt, and very little in the way of long-term marketing commitments. This gives us significant flexibility to make investments where we see the best returns and pull back where we don't. All this gives us a continued clear path to profitability at a market level and from an overall business perspective, and we'll look forward to sharing expectations about 2023 and our cadence towards profitability on our next call. With that, operator, you can open the line for questions.

We will now begin the Q&A session. The first question is from the line of Dan Pleasant with Wells Fargo. Please proceed.

Hi, it's Zach Silverberg with Dan. Thanks for taking my questions. The first one, so you've given some incremental color on profitability. Maybe can you just talk about the profitability outlet for both online sportsbook and iGaming sort of at maturity for these businesses in the United States?

Yeah, so we haven't given long-term targets for profitability in each in particular. I think what I'd point you to is some of the trends we've talked about and the success we're seeing, and I think Richard pointed out that our loss this quarter from the sportsbook-only markets was under $5 million. I think that's half or so of what it was the quarter before. So real progress there and I think it's notable that all but one of the markets that we've told everyone that we're profitable in, I include casino. And maybe one other data point I think is interesting is the last two markets that got to profitability for us were Michigan and West Virginia, and they both got there in the matter of four quarters. So I think all that leads you to conclude that you can get to profitability sooner, or we can get to profitability sooner when casino is part of the equation. And we haven't been shy about the fact that casino is more profitable than sports. We really don't have any markets that are at full maturity but even as we watch the cadence of these markets build, casino is always profitable and profitable sooner than sportsbook.

Thanks. And one follow-up. What have you seen in terms of the proportion environment and has it sort of rationalized versus last year during this NFL season, given there's been some fewer state openings and less low hanging fruit in customer acquisition?

Sure. I would say that the competitive intensity is lower than it was last year but more competitive in Q3 than it was in Q2. Which is not surprising given the seasonality of the opening of the football season where many operators, including ourselves, are obviously focusing on trying to activate the players that are interested in betting on the football games for the season with us.

Thank you. The next question is from the line of Bernie McTernan with Needham Company. Please proceed.

Great. Thank you for taking the questions. Why don't you just double-click on sales and marketing spend? So Richard, in your prepared remarks, you mentioned a measured marketing approach a few times and then also seeing that the average cost to acquire players is 50% lower year-over-year. Is there any change in strategy that's happening here or does it have to do with the market being less aggressive and less promotional like you guys just mentioned?

To answer the last question, sure, I would say that following up on our strength in casino is that we've been really leaning into the casino category in the states where you have both sports and casino live, which is an increasing number of states for us and markets internationally. So we're really leaning in on the casino category and allocating more of our spend in Q4 and more spend overall in Q4 to attract these players during a great seasonality for casino, which is the winter months, especially in the Northeast where we have a large percentage of our casino markets. We also are spending on rebranding in New Jersey, which is more in Q4 than we did previously because we were in the middle of a rebrand and wanted to wait for that rebrand to be complete before spending more and investing more on that.

No, I think you covered it for the most part. I mean, it really is just seeing opportunities to spend more in the fourth quarter casino opportunities. We think we can get good value. You know, we've talked about plenty that we look at each market on its own merits, that that's the tax rate, that's competition. It's how well we think we can do in those markets and that helps us determine how much we're going to spend in each given market. So when we have more opportunities, we're doing more, and when in markets where it doesn't look as attractive at a given point, we'll pull back, and it just goes to the dynamic nature of our marketing spend and being able to pivot pretty quickly. So it's why we've wanted to make sure that it was clear in Q4 that we'd be doing more in the casino areas, and particularly in New Jersey, but we don't expect it to get as high as it was in the first quarter of this year or the fourth quarter of last year.

Got it. And then just the follow-up to that, since you guys are talking about spending more in casino markets, does that mean that you're allocating more dollars to retention marketing or is it still going after user acquisition?

It's really a combination of both. There are some markets where we're still seeing really strong growth that existing markets such as Michigan and, of course, we mentioned Ontario, which is exciting around the growth opportunity there. We have other casino markets in Latin America with Colombia, which continues to perform extremely well for us, and Mexico, which, as we've mentioned, is in a launching period still that we have great expectations for in the future. So I think there's ample markets where we have large populations where casino is attractive, but it also comes down to reactivation of existing customers and making sure that your existing players are treated well, and your VIPs are allocated appropriate amounts of reinvestment to ensure they stay loyal with us.

Thank you. The next question is from the line of David Katz with Jeffries. Please proceed.

Hi, this is Sandra asking on behalf of David. Thank you for taking my question. We understand that iGaming is a bigger contributor to the overall business, but other operators have pointed to better than expected hold in sports so far this NFL season. I'm wondering if you can help us quantify or understand that tailwind for the company.

Yeah, so Sandra, thanks for the question. I think you're right that it doesn't impact us likely as much as it does others when there's movement in the sports hold just because it's not as big of an impact. In the third quarter, sports hold was within our expected range. There have been some good weekends in the NFL; there's no question about that, but it does balance out with a lot of different sports and activities. So it'd probably be too early in the quarter to predict where that's going to end up for the full quarter. But certainly there have been some nice outcomes in the NFL so far.

Great, thank you. And if I may ask another one can we talk about legislative momentum and any new potential states or jurisdictions that could launch iGaming in 2023?

Sure, there's been a lot of momentum growing for iGaming legalization, in part driven by the recognition from our competitors and ourselves, just how valuable it is to complement sports betting with iGaming being legalized. With that in mind, you're seeing states like Iowa and Indiana and Illinois, the three eyes, let's call them, are really showing some momentum in terms of having opportunities to legalize iGaming over the next year or so. New York is also a market where we think there's an opportunity. We remain focused on exploring ways to legalize iGaming. I think what's really important to note is that all of our peers, whether it's large land-based casinos or maybe sportsbook first daily fantasy type of companies, are all aligned around funding, not just supporting verbally, but really putting some money to work to lobby for iGaming legislation for the first time really in the history of this industry in the US market. So with that focus and funding and alignment, I think it's very possible that you will start to see some movement in legalization efforts in the states that I mentioned, perhaps others, and for us, obviously, we would benefit if iGaming is legalized in any of these markets because of our strength in casino.

The next question is from the line of Jordan Bender with JMP Securities. Please proceed.

Great, thanks. Thanks for taking my question. With several states looking to launch in the next several months should we expect these states to see a similar path to being contribution positive, or has the fundamental shift in profitability maybe steepened that return curve?

Yeah, so your question is, are we looking at a new launch in say, Maryland, Ohio, different than we would've looked at a launch a year ago or two years ago? So I think there's still a lot of excitement for us around sports markets, and sports markets can certainly be profitable for us, and we have many that are headed in that direction. I think we're very mindful of how much we allocate to sports markets, what the economics are around each of those markets that we enter, and what the trade-off is between investing there versus investing in iCasino markets. So we'll look at it closely, we'll monitor the competitive situation, we'll monitor what the cost is in any given market and, as we always do, we'll monitor what the player values look like early and often, and make sure we're investing in the right way and we're not going to get caught up in a game of trying to hit a certain market share target in a state and spend to that. We spend to the economics that are appropriate for the cost to acquire players and the value that they generate.

Great, thanks. And then my follow-up, you talked about Mexico. Can you just kind of talk about, you know, we've been live there for a few months now, just kind of what you've seen in terms of maybe market dynamics. Compare that to what you saw maybe in Colombia when you launched, and I think you've mentioned in the past you have close to 20% share in Colombia. I mean, is it conceivable to possibly get to something like that in Mexico?

Sure, yeah. So we're off to a quicker start in Mexico than we were in Colombia, and we expect that pace to continue. As I've mentioned before on this call as well, we like to take the time necessary to ensure our product and brand reputation. Our top notch is not as if we're launching in a market with a bunch of competitors all at the same time, and there's a land grab for share day one. It's really the opportunity for us to do the little things right, improve the user flows and experience at the level we need it to be at, to feel like we are the best products in the market. And we think we have a clear line of sight to achieving that, and it won't be very long before we feel pretty confident to be able to spend more marketing on the product to ensure that when we do start to create greater awareness to the product, to our consumers in that country, that they're going to feel right away that we're very high quality and really become the home of those bettors. So we do think long term we have the chance to be as successful in Mexico as we are in Colombia.

Thank you. The next question is from the line of Chad Beynon with Macquarie. Please go ahead.

Hi, this is Aaron, not for Chad. Thanks for taking my question. I apologize, this has been asked already. I got dropped from the call. I wanted to touch on your social product, which I believe sets you apart from other operators. Are there synergies on the development side in terms of bringing the gamification from social into the real money gaming product to drive engagement and retention?

It's funny you should ask that question because the answer is yes, there are ample things to learn from the social space and things that are done there that we think are quite relevant in terms of how you gamify the playing experience online. In the real money casino market, we are one of the unique operators that has the same technology built into our platform for social and real money, and like development is done on the same platform and updates are done at the same frequency. So there's a very close alignment between the two and when we build something in social to test things out in social, it's quite easy to then bring it over to real money afterwards. So it is a great testing vehicle for us to use as well as being a great asset to help us convert players in a casino market before the market's regulated into being real money customers in the future. As we've mentioned, we did successfully in Michigan. So social is a dynamic, innovative category of gaming and it's something that we have a team and myself included that are very familiar with those products in those categories and how they've delivered innovative experiences for players. And there's certainly some inspiration that we see from what's worked there that we plan on and have in the past used for our success in the casino.

That's great, thanks. And then as a quick follow-up, you mentioned the rebranding in New Jersey to the Bet Rivers brand. Can you discuss what the early response or results have been and how that's tracking relative to your expectations?

Well, it started with the launch of the football in Q3, but due to it being a really casino-first market for us and the cold weather months being the prime time for casino players, we're really intensifying the marketing effort for New Jersey for the rebrand really in Q4 because of the attractiveness of that seasonality for that opportunity. So I would say that what's exciting for us is that the players that were there obviously didn't have to sign up on a new brand, and we were able to continue playing at their favorite site. And naturally we had co-branding for some period of time to ensure players were familiar with the transition that was happening. And subsequently now we do have the site branded Rivers, and so certainly it's a great benefit to how the efficiency across the rest of our Bet Rivers footprint around the country, which is our dominant brand in the US and Canada for that matter. So it's been, it's met our goals. Certainly we have a lot of effort to put in this quarter and a big opportunity in Q4 and Q1 to really take advantage of that new branding there to really utilize that opportunity during the cold winter months when we feel this is the best time for casino.

Thank you. The next question comes from the line of Mike Hickey with the Benchmark Company. Please go ahead.

Hey Richard. Kyle, thanks for taking my questions. Obviously we've heard you say before that the gaming industry is pretty resilient to economic downturns. But just curious if you can update us on what you're seeing on the macro, if you're seeing any weakness on the consumer, if that is at all reflected in your numbers or any behavioral changes that are impacting your business and how you think about 2023 and your profitability goals given that everyone thinks we're going to be in a recession. Thanks, guys.

Hey, Mike, I'll start with the first question, and I think Kyle maybe will answer the rest or the second one. So the truth is we've looked at all of our data and we haven't seen any indications of any impact to our online player base based on deposits, frequency, deposit volumes, average size, etc. So we think we're in a position where nothing has changed from our outlook in terms of the health of the players on our platform.

Yeah, I think just on the second piece, just thinking about profitability for next year and our plans to be profitable for the second half, it's a fair question because everywhere you turn people are talking about the consumer and what might happen next. The really nice thing about our model and the way we've operated is that we have a lot of flexibility with how much we spend on marketing. We have not built out a big cost structure to manage the business, and you see that in our G&A line. So if that were to happen, that manifests itself and it starts to impact revenue and growth and engagement with players, that likely impacts how much we would be willing to spend on marketing to draw in those players that have those certain values. So I think outside of something much, much bigger, I think we'd still feel good about that profitability for the back half.

Nice. Thanks, guys. And maybe one more. I guess just thinking about the headwinds, and for you, when we sort of, when we sort of look at your business, you have, for the most part, it seems like you've got great tech now. You certainly have market access, leading market access in the US, and your reputation is that you're great operators. So with sort of that being said, how influential is the lack of brand recognition on a relative basis you think, impacting your share opportunity in the US, and when you see rumors of looking for a home, and of course you're in Connecticut, which is nice, how do you think about stepping up your brand recognition through partnerships, whether it's PNR or some others that may be looking to get into this space?

Sure, I appreciate the question. We've been able to grow a brand in Colombia from scratch and it's been very successful for us. We're a top three operator out of many operators in that market. Over time here in the US, our brand awareness has been growing, but one thing that we recognize is that it certainly isn't the level of brand awareness we would like it to be. One thing that we've done is build Bet Rivers Network, which is an in-house developed betting content network that's hired a bunch of very talented and well-respected local legends in different markets. I think someone like Mike Eska in New York is a great example of that, where he is reaching Connecticut, New York, New Jersey, really with great content that's very desirable for the audience. So when you're actually sharing content like that, we have produced over 126,000 hours of content in October on YouTube. You create that kind of volume of content; you get a lot of subscribers and a lot of interest in what those talented people have to say. We're building brand awareness by investing with Bet Rivers Network and really getting a large volume of views on our content. We had 2.7 million views on YouTube alone, so we can see that's really working as a way to grow brand awareness. Of course, some of the other projects we've done with different teams, whether it's the Detroit Pistons deal that we did, where we have a great innovative thing that hasn't been done before — we did it where you're behind the back court; you have a suite that has the Bet Rivers brand on every telecast around their teams. Or it's doing things up in Canada on Rogers media, promoting our brand in front of every Raptors basketball game. We're being very selective and thoughtful, really investing in those partnerships and those types of high visible brand-building opportunities in markets where we also have casinos. So I would say it is fair that our brand awareness isn't as high as some of our competitors, but as we've shown in markets like Ontario, we've been able to build it into something significant and expect to continue our success in that market. So that's the high-level thoughts on that question.

Thank you. The next question comes from the line of Edward Engel with ROTH Capital. Please proceed.

Hi. Thank you for taking my question. It's Ed. I'm going to try to rephrase one of the prior questions I was asked relative to maybe last year, even the start of this year, has there been any pivot in your strategy or even your LTV assumptions that maybe prioritizes profitability over user growth, at least relative to maybe last year? It just seems like the trajectory of your marketing costs have varied a lot just relative to what you initially guided.

Yeah. Thanks, Ed. I think I think everybody across the industry has dug in deeper. We have a lot more information in markets as they mature than we did a year ago or two years ago. I think there is a lot of focus on profitability across the industry and the investor base. I think our behavior hasn't changed all that much. I think what you're seeing with the prudent spending in marketing is a reflection of us measuring the value that we get from what we spend. It's also a reflection of coming out of a period where we had a significant number of new market launches. If you go back to the fall of last year, you had Arizona, Connecticut, New York, Louisiana, Ontario; that’s a long list of big launches that required significant investment. Are we buying or acquiring players at cheaper rates than we were at some of those periods of time? For sure, and that's partly behavior on us; it's more about the competitive situation. So I think we're very mindful of getting to profitability. I think everybody else is talking about it more, and investors are more keen to discuss it. It gets a lot more attention, and we end up talking about it more. But we are very focused on it, but I don't know that that's a massive change from where we were a year ago or two years ago when we were actually profitable in 2020.

Great. Thanks, that's helpful. And then you've talked about a less competitive environment. Does that mean maybe the pricing of some of these advertisements or some of these other marketing assets has maybe trended lower relative to even the start of the year or even maybe the past couple of months?

Sure, I'll take that one. The truth is, yes, assets have in many cases reduced the cost for us to utilize; certainly in the past there were not opportunities where if you didn't accept commercial terms from a marketing asset owner, you would certainly be the next person in line willing to step in and take that asset without any questions. Whereas now, there are assets coming back to us that are looking for better value, and we have a chance to negotiate or have the opportunity to secure at a more favorable pricing. So certainly you've seen a lot of that. Having said that, you still have some of the major operators that are still spending and have their foot on the pedal pretty aggressively, especially during this football season.

Thank you. The next question is from the line of Ryan Sigdahl with Craig-Hallum Capital. You may proceed.

Please explain why was the online casino hold that normally low? I think of that as, you know, random generated games and very consistent.

Yeah. Hey, Ryan, would you mind starting your question over? You were cut out at the beginning for us. I think I know where you're headed, but I just want to make sure I hear the whole question.

Yeah, can you hear all right? I was just wondering for better detail and explanation on why online casino hold was abnormally low. I think of that as, you know, random member generated games and really good control and consistency and very little volatility historically within those games.

Yeah, you're right about the math behind those games, and that is why we are calling it out here because it was particularly different than we've seen in quite some time. Usually, the variance is quite tight across the casino games, and certainly relative to sports, and it just so happened. But there is still luck involved, right? In this case our luck wasn't as good as the players for the quarter, and it ended up hurting us a little bit this quarter. But it's the first time we've seen that be outside the range as much in quite some time.

Okay. And then on MAUs so they were down sequentially for the second consecutive quarter, I guess despite positive sports seasonality. So I guess what was the main driver of that?

Yeah, I think obviously nicely up year-over-year, and I mentioned in September it was actually up 40%. I think probably a big driver of it, and we've probably discussed this in the past, but you know, the MAUs are driven a lot by sports players. Even though the casino players are more valuable, you can have this seasonal shift in MAUs. One thing that happened this year versus last year is the July and August sports calendar because of the COVID shift last year; the July and August sports calendar was not as robust. So, you had less active users in July and August probably because of that.

Got you. And then one last one, you guys changed your promotional offering from a $250 deposit match to one that was up to $500 in free bets. Which base value sounds like a lot more, but I think my back of the envelope suggests that actually has better ROI and costs you less, but curious kind of how that resonated with the consumers and what you're seeing from an ROI standpoint with that change.

Sure, yeah, you're right. We did try some additional new bonus options for our players. The second chance bet was something that we believed would be attractive to the consumer, where essentially it was a risk-free bet where if they were to lose the first bet, they get it back as a free bet to try again. What we would find is that the value to us was stronger in this area; the ROI was a better result for us by using this program here. So we have tested it out, and we rolled it out across several markets, and we like the results that we're seeing so far on that new promotion.

There are no additional questions at this time. I will pass it back to the management team for closing remarks.

Well, thank you again everyone for joining us today. It was a pleasure speaking with you. We look forward to doing it again soon. Thanks.

That concludes today's conference call. Thank you. You may now disconnect your line.