Rush Street Interactive, Inc. Q1 FY2023 Earnings Call

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

Thank you, operator, and good afternoon. By now, everyone should have access to our first quarter 2023 earnings release that can be found under the heading Financials Quarterly Results in the Investors section of the RSI website at rushstreetinteractive.com. Some of our comments will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not statements of historical fact and are usually identified by the use of words such as 'will', 'expect', 'should' or other similar phrases, and are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We assume no responsibility for updating any forward-looking statements. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our first quarter 2023 earnings release and our investor deck, which is available in the Investors section of the RSI website at rushstreetinteractive.com. With me on the call today we have Richard Schwartz, Chief Executive Officer. We will first provide some opening remarks and then open the call to questions. With that, I'll turn the call over to Richard.

Thanks, Kyle. Good afternoon, and welcome to our first quarter 2023 earnings call. We began the year with a terrific quarter. Revenues of $162.4 million were up 20% compared to last year. We achieved this revenue growth more efficiently with stronger-than-expected adjusted EBITDA performance as we remain disciplined in how we allocate our marketing spend and manage our G&A costs. These results continue to support our view that online casino is a key driver for us in achieving our long-term goals. Our business model and focus is centered around our deep understanding of online casino customers and developing experiences that will engage and retain them. In markets where we operate both online casino and sports betting, we continue to see a significantly larger opportunity for top-line expansion, combined with higher levels of profitability. Our strategic decisions consider our long-range objectives and our goal of delivering consistent and growing profitability for our investors. We continue to see the second half of this year as one where we expect to be adjusted EBITDA positive. Our year-over-year growth was broad-based with growth in both our iCasino and sports-only markets. In addition, we grew revenue over 100% in Latin America and in North American markets launched after 2020. Internationally, we had an excellent quarter. Starting in Ontario, which is an extremely competitive market, our handle continues to grow nicely, and we grew GGR by 33% compared to the fourth quarter. With improved efficiency on promotions, we increased revenue by 38% sequentially. Not to be outdone, we continue to perform very well in Colombia. Revenue once again expanded at a very high growth rate year-over-year. In the first quarter, on a year-over-year basis in Colombian pesos, we grew by over 40% across the board, including in handle, GGR, and revenue. In U.S. dollars, we grew revenue 20%, reflective of year-over-year headwinds in foreign exchange rates. Looking at Mexico, we remain focused on building our foundation in the market. This is not much different than Colombia a few years back. We believe that our deliberate and measured ramp will support stable long-term growth and profitability in Mexico. We are continuing to localize our platform and user experience, which is especially important in this market given there are several characteristics unique to Mexico. At the same time, we are building brand awareness and local market acumen by leveraging our partner, Grupo Multimedia. We continue to expect to see a ramp-up in contribution from Mexico beginning towards the back part of this year. On the new market front, while no proposed new online casino legislation in the United States has crossed the finish line, from our vantage point, the 2023 legislative session saw significant progress. There were more efforts and discussions across the country about online casino legislation than we've ever witnessed before. In fact, our count is that 6 online casino bills were introduced this year. Just last week, Ohio's House added language to its proposed budget to study the future of gaming, including online casino. This example and the progress we made in other states to legalize iGaming validate that regardless of the near-term outcomes, there are greater legislative efforts being made, and momentum is growing. As we have mentioned prior, the facts are straightforward; the online casino market, and even the online slot market by itself, is significantly larger than the sports betting market in those states where both are legal. This means that we expect the legalization of online casino in new markets to provide an outsized benefit to RSI, given that we often earn 3 to 5 times the market share in online casino compared to sports betting in those same states. I also want to touch on our recent announcement regarding the state of Connecticut. As I mentioned in my opening remarks, we are very determined to build profitability in a manner that makes sense for our shareholders. Toward that end, we announced a joint agreement to wind down our online and in-person sports betting partnership with the Kinetic lottery. The lottery has begun an RFP process to pursue a new operator, and we are planning to continue to support that market until that transition happens, likely sometime in the second half of this year. The agreement with the Connecticut Lottery does not include any separation-related payments in either direction. While this wind down will impact our future revenues, it will also positively impact profitability in the coming years. We thought long and hard about this decision. Ultimately, we are staying true to our strategy. In any market, we must see appropriate returns on our investment. As the Connecticut market and partnership unfolded, it became clear that it was not the right fit for RSI, and our capital and resources could be used more efficiently elsewhere. Regarding marketing, we remain disciplined in our strategy. We use a returns-based approach for customer acquisition and focus on attracting high-value customers to our platform. As forecasted, our marketing expenses came down considerably this quarter as we moved further away from our many market launches over the last couple of years. We expect the spending decrease to continue in the second half of the year. Turning to product and innovation. We continuously pride ourselves on our ability to differentiate and innovate. We have invested and continue to consistently invest resources to build efficiencies and improve the user experience. In addition, we constantly strive to bring new features to market. A terrific recent example of a new online casino experience is the announcement we made in early April about the launch of a first-of-its-kind online slot tournament in Michigan, which we are calling the River's Michigan Million. Players have the opportunity to earn turn-on points and experience the excitement of the tournament's real-time leaderboard. To qualify for the chance to win a portion of $1 million in total bonus money, players in Michigan were able to visit BetRivers from April 1 to 30 to register and play. We're receiving a nice reception to this unique experience in Michigan as our first test, and we are excited to find new ways to increase player engagement in other markets with our differentiated online slot tournament engine. On the sportsbook side, we leveraged our unique feature, our proprietary squares engine during basketball with March Madness and the NBA, and we've seen a strong improvement in both average bet sizes and same-game parlays as a percentage of total bets. In fact, same-game parlays as a percentage of total bets have more than doubled since putting that promotion in place for NBA games. Finally, I want to congratulate the entire team at RSI for winning the Customer Service Operator of the Year at the EGR North America Awards event last week. This marks the fourth year in a row that we have won this prestigious industry award and is further validation of the cultural value we place in bringing world-class service and products to our customers. We also understand that trust is one of the biggest drivers for consumers in choosing an online gaming and sports betting company. That's why we automate our systems and empower our customer service teams to earn players' trust by quickly resolving tension points for players in need of support. With that, I'll turn the call back over to Kyle.

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

Our first question comes from Chad Beynon from Macquarie.

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

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

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

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

Kyle, appreciate it.

Our next question comes from Jed Kelly from Openheimer.

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

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

Thank you.

Thank you. Our next question comes from Bernie McTernan from Needham.

Just on the Ohio launch in Q1. Anything different or unique that you saw and anything we can take away from that?

Yes. I would say that Ohio is a market where we have a large population, a reasonable tax rate, and it is adjacent to a bunch of other states that we're operating in. So we felt like we evaluated every state on a case-by-case basis, but it came out positive for us due to some of those reasons. We were modest in our efforts in terms of marketing, but we have changed our marketing promotions in a way that we think serves us better and does get a return faster for us in sportsbook markets. We did launch there, and as you know, we're not really focusing on market share as a strategy, because our goal is to recover our investments as fast as we can and to be profitable long-term. We're only spending on what we believe we can get a strong return on, staying disciplined and not just marketing for the sake of it or trying to grow share in a market like that, but ensuring that when we spend on marketing in a launch situation like Ohio, we can secure our returns quickly. We've adopted a more modest approach, and it has made a positive contribution for us sooner than some of the other markets in the past where we may have had a different strategy.

That's great. If I can squeeze in one more. In your slide deck, you talked about future potential opportunities in South America in countries like Brazil, Argentina, and Peru. Any possible timing or anything you can give us on that?

Yes. No, we love that region. As you know, we've had success in that market with Colombia and Mexico. We are continuing to evaluate different markets down there. Some are in different states of legislation, some legislation has passed, but regulation is not yet published. Others have both and are relatively small markets that might take some more time to grow. We have a team focused on leveraging our incredibly strong technology and leadership and operations in that region to extend into other markets. We want to ensure we do it in a thoughtful way that delivers long-term value for us. But that's a region we look at the populations of Argentina and Brazil, which is another example of a market that has regulated online sports betting but has not yet regulated online casino. There are some efforts to do so. You can imagine we're very engaged and active in that region, constantly evaluating what the best opportunity is for us to invest and obtain returns for our shareholders.

Our next question comes from Dan Politzer from Wells Fargo.

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

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

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

Right. So this is Richard. Yes, we are comparing all opportunities globally, whether it's South America, North America, Canada, or just the existing markets, and evaluating where the best use of our corporate resources will generate the strongest return. Our goal is to continue improving our sportsbook experience, which we believe we've done a strong job of. We also aim to improve how we market and promote that product to ensure that we can reach profitability and grow profitability in the sportsbook only market. As Kyle referenced, we've seen fast growth over the last several years after 2020, with over 100% growth in our newer markets, mostly in the online sportsbook market. So I would say we are constantly evaluating existing markets and new markets. When we decide a change is necessary, we'll be sure to communicate that to everyone.

Yes. I think the only addition I would make is that it is an ongoing evaluation. This is not just a point in time. I think Connecticut had some specific things that made it the right move for us to exit that market. I wouldn’t take that as a sign that there’s a trend of exits from states but rather as a confirmation of our continual evaluation of market opportunities. It remains essential to understand if it represents money well spent and if we can expect positive long-term returns.

Our next question comes from David Katz from Jeffries.

I wanted to delve a bit deeper regarding Connecticut, where you mentioned you would likely support them through the second half of '23. Is there any time limit on that? From the standpoint of potentially exiting, it might be challenging for them to find someone else. Does this mean you will remain involved for a while, especially since you're seeing significant progress in most other areas?

Yes. So David, without detailing all aspects of our agreement with the Connecticut Lottery, they've been a great partner. It probably didn’t work out as we all expected, and that’s why we’re exiting. There's not a specific time frame. I know they’re going through a process, and they've made it public that we’re planning to support them through a transitionary period. Ultimately, we don't know what's going to happen and who their eventual partner will be. We'll ensure that it's appropriately working for us and that we've got the right protections in place for ourselves, of course. But I think we're in a good position now. We’re comfortable with where it’s set to be for the remainder of the year and as we move on from it at whatever point that happens.

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

Sure. Thanks, David. This is an area I have particular passion for and have been in this sector for a long time. What’s interesting is that in most cases, there's very little differentiation and innovation in the user experience for casino gaming. The reason is simple; most operators integrate content from third parties and perhaps innovate or exclusively license or develop their in-house content to offer something unique. But there’s been little created that’s truly innovative and provides reasons for players to choose one operator over another. I would say we are in the very early stages of that development. We’ve invested many years in building unique features and functions in our casino experience. Players that use our product quickly realize that even though we might have some similar games to other sites, there are many additional experiences we've built in-house with a proprietary gamified promotional engine that creates a unique experience. We have a community chatroom for players to communicate, and we offer trivia games, along with a real sense of community tied together with unique features that provide players incremental opportunities to win and have fun, whether it’s through bingo games, online slots, bot bonuses for players experiencing a rough streak, or through animated characters and fun features like scratch cards or wheel spins. We aim to create fun experiences that go beyond just existing casino games, which creates unique experiences. I believe that we're on the cusp of significant growth in that direction. We are racing ahead with exciting innovations and developments in that area to grow profits in our casino business.

Our next question comes from Jordan Bender from JMP Securities.

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

Sure. I mean, years ago, I started and ran a business in the U.K., and I'm familiar with the European markets. Our Chief Operating Officer, Mateus, was also the Chief Commercial Officer over one of the larger operators in Europe for nearly a decade. So we possess a lot of knowledge and experience in this market, and we're always open and considering opportunities. The opportunity in the U.S. is extremely large. We believe being focused on the Americas is beneficial. We feel we have a head start in many ways, certainly in Latin America regarding product quality, technology operations, and how we operate in that region. We're continuing to gain share in markets in the U.S., such as Ontario or very competitive markets like West Virginia and others. While it's possible we always evaluate organic opportunities to expand elsewhere, we want to remain focused on the significant opportunity ahead of us in the U.S. market.

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

Yes. I mentioned that we likely expect several hundred basis points of full year improvement over last year, which puts the full year here in the range of about 33%. Our margins in Q1 came in a little better than we expected. Fortunately, as I mentioned previously, we've had more of our growth in some of our higher gross margin markets. It does come down to the mix between different markets and how profitable each of those markets are along with tax rates, and also the mix of casino and sports. I expect the back half to be as good or better than the first half. However, I would also say that Q1 was a little better than I had originally anticipated.

Our next question comes from Edward Engel from ROTH MKM.

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

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

Does that imply that the rest of the business might be doing a bit better than what you initially thought?

Yes. I think it's modest enough that the impact from Connecticut later in the year is not a dramatic one on overall revenue. Certainly, it will impact 2024 revenue, but depending on the timing, it's not a substantial impact. In the most absolute terms, yes, if we're noting revenues coming out of that bucket, that means more revenue in some other segments. There’s probably a little bit there, but it's not significantly material.

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

Yes. I do not want to specify points in time or exact numbers on markets necessary to achieve that, but we did see some operating leverage this quarter, which is promising. We expect to see more over the upcoming years as we continue to grow. I also mentioned a few times already that we're growing revenue faster in some of our higher-margin jurisdictions, which is a positive sign. Marketing expenses are declining as a percentage of revenue in many of our matured markets. We’re still investing in our corporate G&A and technology teams, but we'll achieve leverage in that area over the coming years. I believe to reach our target EBITDA margin, we will need some additional markets to launch or enter into, and certainly, offering online casino will be crucial. I wouldn’t want to pinpoint exact times or how many, but we’ll for sure make consistent progress towards our goal regardless of any new markets launching, although their addition would certainly be beneficial.

Our next question comes from Mike Hickey from Benchmark Company.

Richard, Kyle, great job on your quarter. Just curious, I guess, one of your competitors is seeking strategic alternatives to their U.S. business. It sounds like they've had some success. There's some interest, and apparently, they're pretty far along in that process. They have access to 14 states. I think some of the challenges they have is resource constraints and the feeling that consolidation in the market is inevitable, given profitability challenges. So just curious how you think about your current situation in this environment and whether it makes sense or not to pursue perhaps a similar strategy, considering strategic alternatives versus operating independently as a low-share operator with constraints.

Sure. I'll answer that, Mike. We're really proud of the business that we are developing. We've invested $280 million in capital to achieve a top 5 position in the U.S. market with a somewhat lesser-known brand, if we're being honest. When looking at that, it's quite an accomplishment. However, there might be opportunities to look at different partnerships and approaches that can generate shareholder value in the future. We must remain open-minded about such opportunities while acknowledging that we have a clear path ahead, backed by capital to support that path. We've shown we can grow and scale this business with substantially less capital than others have, so we feel very confident in our continued growth.

I guess the follow-up; obviously, you're pulling out of states that, from a high level, were fairly important. Exiting Massachusetts and Connecticut, which has been a challenging state, but there are only three operators. When considering your business today, Richard, your product is solid, and you have access to key states, but you're going in reverse. Is this simply a database challenge for you; a brand challenge? And if so, do you see an opportunity to align yourself with the database that could sort of complement what you have on the retail casino side to sort of reset and drive business in online sports betting?

Right. So returning to the brand, as I mentioned earlier, we don’t have the most recognizable brand nationally, even in some regions of the country, certainly at the same level as some of our competitors. However, what we accomplished with that comes down to the quality of user experience, product, customer service, and the way we treat our customers. A great brand can be built over time; it's usually not immediate. In a highly competitive environment, this process may take longer to achieve due to the significant competition for attention. However, as we’re seeing a decline in the intensity of spending and competition, I would advocate that having access to large databases, a stronger brand, and a longer brand-building timeline will certainly help us deliver stronger results in the future. That’s something we're continuously evaluating; exploring ways we can improve our performance. However, we have examples where we focus on growing share successfully in both casino and sports markets, and we believe we possess what it takes. Any selection of entering markets or not making sense economically will also be a key factor in our strategic decision-making.

Our final question comes from Joe Star from Sohana Financial Group.

I had a couple of questions just on iCasino operations. Is it fair to assume that Michigan and Ontario will be the biggest growth drivers for results this year? That’s my first question. Then my second question really is on Pennsylvania and New Jersey, which you described as more mature. You have a rebranding in New Jersey, and I’m wondering if you return to that market with the rebranding; might you flip that to a growth state?

Yes. I think your point about Ontario and Michigan holds true. Those should be significant growth drivers for us. We noted during the call that Latin America has been growing nicely for us, even amidst significant currency headwinds in the first quarter. However, we’re also witnessing nice growth in some of our sportsbook-only markets. Therefore, I think growth will be broad-based, with opportunities existing across many participating markets. I previously mentioned that some of the larger, more mature markets like Pennsylvania, New Jersey, and Illinois probably present a lower growth profile this year.

When considering a market like Pennsylvania, we got off to a strong start; it features unlimited licenses, meaning the competition is growing as more entrants arrive. Our goal is to continue growing as we have been in that market and to focus on those lower players that we believe we’ve built many unique features to support and continue growth in that business.

Yes, we're certainly considering that. We believe there's opportunity. The rebrand was essential, and we feel we made the right decision. However, it will take some time to rebrand effectively. That particular brand has been a part of our business since we launched in that initial market many years ago. It will take time to establish the new brand. Still, we feel confident in the efforts being put into the casino category, and there will be a chance for us to grow in that market in the future.

This concludes today's call. Thank you for joining. You may now disconnect.