Rush Street Interactive, Inc. Q2 FY2024 Earnings Call

Good day, ladies and gentlemen, thank you for standing by. Welcome to the Rush Street Interactive Second-Quarter 2024 Earnings Conference Call. Please note that this conference call is being recorded today July 31, 2024. I will now turn the call over to Kyle Sauers, Chief Financial Officer. Kyle you may proceed.

Thank you, operator and good afternoon. By now everyone should have access to our second quarter 2024 earnings release, which 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. In particular, we'll be discussing adjusted EBITDA, which we define as net income or loss before interest, income taxes, depreciation and amortization, share-based compensation, adjustments for certain one-time or non-recurring items and other adjustments that are either non-cash or are not related to our underlying business performance. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is available in our second quarter 2024 earnings release and our Investor deck, which is available in the Investors section of the RSI website at rushstreetinteractive.com. For purposes of today's call, unless noted otherwise, when discussing profitability, EBITDA or other income statement measures other than revenue we are referring to those items on a non-GAAP adjusted EBITDA basis. With me on the call today, we have Richard Schwartz, Chief Executive Officer, who 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 second quarter 2024 earnings call. Looking back over the past 12 months, our results have been a clear sign to us that our approach is working. We have consistently exceeded expectations and this quarter is no exception. As we continue to innovate, grow and deliver value to our customers, I remain confident that we are well on our way to achieving our goals of being a leader in online gaming across America. Second quarter revenue was $220 million, up 34% year-over-year and EBITDA was $21.4 million, representing a $20 million improvement year-over-year. Both of these were quarterly records, and I'm very proud of our team for continuing to generate these excellent results. Consistent with trends from the last couple of quarters, we are adding new players to the platform faster. We are doing it more efficiently and we are maintaining high payer value for offering a differentiated experience that keeps players coming back time and again. All of this leads to solid top line growth and strong flow through to the bottom line. As we see in our recent quarterly results, we are continuing to post strong growth across both iCasino and sports, with iCasino revenue growing more than 40% year-over-year and online sports betting more than 25%. Underlying the growth is a solid mix of increasing player accounts with improving player value trends that we attribute to our high quality and differentiated user experience. It engages and retains players on our platform. For the second quarter, MAU growth in the United States and Canada was 24% year-over-year. This is the 6th consecutive quarter in which we have seen our year-over-year MAU growth in North America accelerate. In Latin America, rapid MAU growth continued during the second quarter, as we were up 79% year-over-year. It is noteworthy that this growth in users across our geographies did not come at the expense of player value. Specifically, we increased North American ARPMAU compared to last year by 6% while Latin America ARPMAU was only modestly lower in the second quarter despite the outsized MAU growth. With that overview, let's zoom into some key market highlights to provide added context on our results. We continue to diversify our revenue streams across markets. In Latin America and in US and Canadian markets launched since 2021, revenue was up 75% year-over-year in the second quarter and the percentage of revenues generated from markets outside of Illinois and Pennsylvania is now 59%, the highest it's been since going public. Our ability to deliver much higher growth in our more profitable markets continues to drive higher incremental profitability. On our last quarterly call, I shared that each of Michigan, New Jersey and Pennsylvania had the highest levels of year-over-year revenue growth in over two years. This trend continued, again, as all three markets exhibited even higher growth during the second quarter. In fact, we had nine different markets with year-over-year online revenue growth rates of over 50%, again demonstrating the breadth of our success in growing the business. In Delaware, our performance continues to progress nicely achieving total GGR of over $37 million during the first half of the year. Our iCasino revenue during this period was more than four times what the previous operator had achieved in the same prior year timeframe. Toward the end of the second quarter, we added live dealer on the iCasino side and we're excited to have our first football season approaching on the sportsbook side. We continue to steadily expand our customer base and remain very excited about where we see the opportunity progressing in Delaware. Certainly our success has caught the attention of others in our industry, who chose to bypass the Delaware RFPs over a year ago. Many investors and analysts may be familiar with the recent lobbying and legislative efforts to alter the operating model that is delivering great results for those states. In the recently ended session, the proposed legislation was soundly defeated. The bill failed to advance to a floor vote in either House or the Senate before the legislative session adjourned on June 30th, as it was clear that the current industry framework is delivering better outcomes for the state. We continue to maintain our focus on exceeding expectations in Delaware. Turning to our Latin American operations, we continue to experience great momentum. Revenue in the region grew 73% year-over-year, and as noted earlier, that growth was driven by the substantial year-over-year MAU growth. While the vast majority of this revenue growth comes from Colombia and Mexico, we continue to see solid growth and remain ahead of where we were at the same point in time post launch in Colombia. When it comes to marketing, we continued to refine our strategy and spend to target the highest value players and find them in unique ways. In the United States, we added a record number of first-time depositors to the platform for a second quarter while at the same time having our lowest second quarter marketing expenses since going public. This says a lot about our efficiency and the success of our marketing strategies and efforts as it goes without saying that our cost of acquisition benefited significantly. In Latin America, we also added a record number of first-time depositors for a second quarter, beating our previous high by an impressive 71% while at the same time reducing spend compared to the comparable quarter last year. To say it simply, we're spending less to acquire more customers, and as a result, we're very proud of that. We continue to use high-profile events to acquire new players, benefiting from the second quarter in Latin America and continuing momentum into the third quarter with the Copa América and Euro Cup soccer tournaments. Our teams use this unique opportunity to bring on a significant number of new players, introducing them to the RushBet brand and platform with a goal of retaining them for years to come. We have a similar opportunity around the Olympics in North America and we've been strategic about picking up unique media assets to drive user growth that should benefit both our iCasino and sports betting verticals. On the new markets front, we continue to pursue and evaluate a variety of opportunities across the Americas. Let's begin in Canada. Many of you may have seen that since we last spoke, Alberta legislature passed a bill that is a step forward in efforts to launch commercial online gaming and sports betting in that province. From our vantage point, that momentum is beginning to point to a near-term launch as being a real possibility. We will continue to monitor the opportunity in the province which, according to the Canadian Gaming Association, has among the highest per capita spending on gaming in the country. This is a market that has great attributes, much like we've seen in other markets in North America. In Latin America, as we announced this week we are now live in Peru with iCasino and online sports betting, marking the third country we've launched in Latin America. Peru is a market we are excited about. It has about two-thirds of the population of Colombia with a slightly higher GDP per capita. We believe we are well-positioned for success there given the marketing adjacencies and overlap with Colombia, existing brand recognition, and the established teams in Latin America we will leverage. We're planning for a modest loss period initially, so we don't expect a significant impact on either expenses or revenues in 2024. We look forward to discussing our progress there on future calls. Our evaluation in Brazil is ongoing. We are awaiting clarity on several items including the tax framework and how the gray market will be treated post-regulation. Again, our strategy has been to maintain certain levels of fiscal discipline in all of our markets, both new and existing. Brazil will be no different. We will continue to provide updates as appropriate on our plans. Lastly, I will add there are other markets in LATAM that we continue to evaluate, and of course, we will provide updates on these markets when appropriate. With that, I'll turn the call over to Kyle.

Thanks Richard. Second quarter revenue was $220.4 million, up 34% year-over-year with balanced growth once again in both iCasino and online sports betting products. Our growth was also strong across our different geographies and market vintages. As the business continues to scale further, top line expansion is resulting in growing profitability. We had record EBITDA again this quarter coming in at $21.4 million, up over $20 million from last year's Q2 EBITDA of $1.2 million. As our business scales, we continue to drive improvements in profitability with strong flow-through. As Richard discussed, our revenue was driven by strong growth in our player base in combination with a nice improvement in player values in North America. In North America, MAUs were 164,000, up 24% year-over-year, while ARPMAU was up 6% year-over-year to $380. In Latin America, MAUs were up 79% to 288,000, while ARPMAU was down 2% compared to the prior year period. We are bringing in players efficiently, retaining them well, and driving strong player value by offering them a unique and fun experience. In the second quarter, gross profit margin increased around 100 basis points sequentially to 34.6%. Revenue from markets other than Pennsylvania and Illinois accounted for 59% of revenue during the second quarter, while gross profit margin in markets other than Pennsylvania and Illinois reached 47% during the quarter, the highest point in our history. We're also very pleased with our marketing investments for the quarter. As Richard mentioned, we set records for new players in both the U.S. and Latin America, but we also did so while cutting our cost to acquire players by more than half compared to the year prior. Marketing spend during the quarter was $36.3 million, down 10% compared to the prior year quarter. As a percentage of revenue, marketing was 16% during the quarter, down from 24% in the year-ago quarter. We expect marketing spend to increase sequentially into the third and fourth quarters, reflecting the increased investment Richard referenced for the Olympics, the start of football season, and capitalizing on our ability to acquire players at much better CPAs. As always, we'll stay flexible and dynamic with our marketing spend. G&A for the second quarter was $18.5 million, up 1% sequentially. We expect G&A to continue to increase sequentially throughout the remainder of the year as we make investments to support our growth. Turning to the balance sheet, we ended the quarter with $194 million in unrestricted cash and no debt, and we've generated a $28 million increase in our net cash position through the first half of the year. Turning to our guidance, with a strong first half of the year behind us, we are raising both our full-year revenue and EBITDA guidance for 2024. We now expect full-year revenue to be between $860 million and $900 million, which increases the midpoint to $880 million, up $45 million from our prior guidance. We expect full-year EBITDA to be between $64 million and $72 million, which increases the midpoint to $68 million, up $13 million and 24% from our prior guidance. As a reminder, our guidance includes only those markets that are live as of today. And we think it's noteworthy that we're raising EBITDA guidance despite the impact of the increased Illinois tax rate and the costs associated with the Peru launch. And with that, operator, please open the line for questions.

We will now begin our question-and-answer session. Our first question comes from Ryan Sigdahl with Craig-Hallum Capital. Ryan, your line is now open.

Good afternoon, Richard, Kyle nice job. Good quarter here. And maybe Kyle sticking on the last point talking about Illinois and the tax increase. Can you talk through the puts and takes and I guess who's ultimately burdened given your managed service agreement with Rush Street Gaming with ultimately the higher taxes in the state? And then secondly, how do you think about strategy as it relates to the competitive intensity and how the marginal tax rate may impact your larger competitors in this state relative to yourself?

Yes, I'll go on that first part, Ryan. And I'll let Richard chime in. The way the tax rate was finalized, being a graduated tax was better for us. As you point out, more of the burden of that is on our partner in Illinois. The impact on us ends up being less than we originally expected under the construct that was put forward initially. So at current revenue levels, it's less than a $2 million annual impact on us. Obviously, we hope for that to increase as we increase the business there. And as I think I pointed out in the prepared remarks, we've built that impact into our guidance already.

And from a competitive standpoint, transitioning from being one of the most reasonable tax rate markets in the country to one of the highest ones will probably lead to a change in the effort and investment made in the state. Therefore, I think the competitive intensity will decline. That actually bodes well for companies that are less aggressive in their spending, as we should focus on creating an experience that players enjoy and that retains customers, which is where we've historically excelled.

And moving up north to Ontario. Any comments on performance and if you're willing to comment on growth rates relative to the overall industry figures that we see?

Sure. We're really excited by the marketing campaign running right now during the Olympics, which is essentially exclusive around the entire country, really making sure our brand is front and center. During the Olympics, we're really the only brand that's in the category that's being broadcast in association with all the Olympic broadcast. So, given a lot of interest in the basketball team up there with a lot of NDAs, some star NBA players and obviously, sports like tennis and soccer performed really well for us outside of the Olympics, and we're expecting it to do well for us during the Olympics. We think it's a great opportunity for us to head into the second half of the year to continue growing the way we have. We aren't going to really break out specific market performance as we like to maintain discretion.

Very good. I'll turn it over to the others. Thanks, guys. Good luck.

Thanks, Ryan.

Next question comes from Daniel Politzer with Wells Fargo. Daniel, your line is now open.

Hi, good afternoon, everyone. Thanks for taking my question. The first one on flow through, the first half this year has been really strong. Obviously, you've been selected profitably and positively in terms of your profitability. But as we think about the back half of the year, I think your guidance is implying something like 20% flow through. To what degree is there some conservatism baked in there? Or is that more reflective of market launches or Illinois or something else altogether?

Yeah, Dan, thanks for the question. This is Kyle. I'll take it. Some of the improvements in EBITDA compared to last year in the first half relate to lower marketing spend. Based on what we've indicated today, we're actually expecting to increase marketing spend year-over-year in the second half. So that impacts the flow-through during those quarters. I think it's probably more useful to look at the full year and take out some of the seasonality of the business and our marketing investments. And if you look at it that way, the guidance puts us in a low to mid-30% range for flow-through for the year.

Got it. And then in terms of the customer acquisition environment, have you seen any changes in terms of the cost to acquire a sports betting customer versus iGaming?

We have managed to reduce costs across all areas of marketing. Initially, the market was quite irrational, but it has become more rational. Our investments in technology and marketing tools have led to significant improvements, allowing us to identify valuable players in the right markets. Consequently, we are acquiring more players at a lower cost, which has greatly enhanced our efficiency. We believe there are still opportunities for further improvement in this area. Overall, we have noticed positive changes and are enthusiastic about increasing our marketing investments in the second half of the year.

Got it.

Yeah. Just maybe put a fine point on it, Dan. It's improved very nicely in both sports-only markets and markets with both products.

Understood. Thanks so much.

Thanks, Dan.

Our next question comes from Bernie McTernan with Needham. Bernie, your line is now open.

Thank you for taking the questions. To follow up on Ryan's question about Illinois, have you noticed any changes in the behavior of operators since the tax rate increase, even though it's only been a month?

No, I think we really haven't seen anything that I would comment on here.

Okay. Understood. And then just given the success in the strong MAU trends that you've seen, would there be any thought of revisiting states that you aren't currently in where only online sports betting is legalized like in North Carolina, for example? Does that make more sense now given all the success that you're having?

Well, we look at those markets all the time. The ones that were the ones that we are out of. We're always constantly evaluating opportunities for the best ROI. And we think the mix we have right now is really strong. What we're seeing is that a larger percentage of our overall market footprint are now moving to casino markets. In fact, 9 out of our 19 states now have casino markets, I should say, globally have casino in it. So I think the combination really gives us twice the value to acquire players to sports is cross-border casino. So while it's possible, we are getting much better in sports constantly. Our products are improving, our user experience is improving. We're bringing some innovation to the market in the last year that has worked really well. We have some additional ones we're working on for later this year. So I think it's never something we don't consider, but I would say that we're really glad that we are growing in the way that we are in all of our markets. We are very balanced in the casino and sports. The sport is a big part of our business still and it's something that we're excited to keep growing. But I don't think it's something that we're spending, so for us to be jumping into another sports-only market.

Understood. That's all for me. Thanks, Richard.

Our next question comes from David Katz with Jefferies. David, your line is now open.

Good evening, everyone. Thanks for taking my questions. I apologize if I missed it in your prepared remarks, I wasn't on time. But Delaware is a market that has been one of the important engines of growth. Could you just give us some updated color on sort of how that's doing and put some context around just how big it is in the grand scheme of things potentially?

Sure. I mean, it continues to be a real strong performance for us. I think the quality of the technology and our user experience really has resonated with the audience there. They're almost immediately, and we're continuing to improve our performance there to the point where we shared that we are generating four times more than the prior operator had achieved over the same prior year timeframe. So really a strong result. We are adding live dealer. We did add live dealer at the end of this last quarter and as you know is a very popular product category. One that brings a lot of trust to the users who like to play table games. And so we're excited for that to have been live and we'll get the benefit of that. We think during the football season when you have a lot of cross-sell between the sports and the live dealer type of products here in the US and we're just really excited for the first time to have ever in the state of Delaware to offer an online sports product that's getting a football season. So I think those two things, live dealer and football season, are going to be opportunities for us to continue to expand our customer base and we remain really excited about the opportunity in Delaware.

And is it fair to classify it as I assume it's growth outgrowing kind of the company as a whole at this point. So it's sort of accretive to the growth. Any context we could put around that?

Well, it's all new for us. So obviously it's all growth. We did, as a reminder, exit Connecticut late last year. So that's a bit of an offset, but it's been a nice contributor for us in the first half of the year about $37 million in GGR. Obviously, there's some bonus in there that brings that number down to the financial statement revenue number, but we'd expect it to continue to grow nicely in the back half of the year, as Richard pointed out for reasons being first, football season and the addition of live dealer.

Okay. That will work. I have more but I'll come in the back end. Thanks.

Thanks, David.

Our next question comes from Chad Beynon with Macquarie. Chad, your line is now open.

Afternoon. Thanks for taking my question and nice results. I wanted to ask about hold rates I guess related to both high gaming and OSB. Anything major to call out in the quarter? And then I guess going forward there's a couple of things. Obviously, the Euro Copa finals were here in the third quarter. So wondering if you could provide a little color around that. And then more importantly as we kind of get into NFL season kind of where's the product now? And how are you thinking about potential hold rate increases versus what you had last football season or in Q4 2023? Thanks.

Thanks. All right, Chad, I'll start. I think there's about six questions in there. So I hope I can get all of them. On Q2 hold, both iCasino and sports margins were within our expected range. Sports was probably the lower end of our range. I'd point out that our expectation is that of all of our hold ranges for both iCasino and sports continues to improve, which I think answers another of your question that we'd expect the improvements in our product mix. Our new product central came in late last year. The squares are the improvement in our parlay product and Same Game Parlay product should drive improvement in hold this year. That's the same across the business, and on the Copa and the EURO, I think Richard highlighted just how helpful that was for acquiring new players; a lot of great activity both at the end of Q2 and the beginning of Q3. We'll probably wait until we release Q3 results to give a whole lot of details on the outcomes. I think as you know Argentina beat Colombia in the finals. So that was certainly a good outcome for us.

Thanks. That's great. Appreciate all that on hold. And then, separately just on Mexico I know you mentioned that the business is at a better point at its own right since launch compared to where Colombia was. So how should we think about timing when a business like this scales up? Or can you just remind us how long it took for Colombia, which is still growing now, to really get to a significant amount of contribution? Thank you.

I'll start and then maybe Kyle can add in. Mexico is growing very nicely. It's a really fun opportunity for us. You have to get all the globalization and customization right, which we're almost at the point where we have that. We have a couple more payment integrations we're finishing up that I think is going to make an improvement as well. But we're real excited for that. We have a casino audience down there that I think really understands the casino category and obviously gets to appreciate the variety and the quality of our casino experience. So it is a market that we're investing more in because we do see larger opportunities for growth. In terms of the actual timeline of where we are, well, let's see.

Yes, so I'll just, without absolute specifics, it took Colombia several years before we started to really hit our stride and accelerate growth. But as you've seen over the last several years, once we got to, I don't know if tipping point would be the right term, but brand awareness and product were really where it needed to be in Colombia, growth has really accelerated. We think we have a similar opportunity in Mexico, as we start to build that base and develop some brand awareness. Product is certainly in a better place today than it was in Colombia five years ago, so we think the opportunity is really, really nice for us there.

Sure. Thank you both very much.

Thanks, Chad.

Our next question comes from Jed Kelly with Oppenheimer. Jed, your line is now open.

Hey, great, great for taking my questions and great quarter again. Just a question on promotional velocity in iGaming. Have you seen a material difference in the industry? And then just on improving CAC trends, I think we've heard from multiple operators now they're seeing lower CAC on a similar level of marketing. So is there something in the industry that's going on that's driving lower CAC? And then I have a follow-up.

Right. So a couple of questions in there. First, as I referenced earlier, we're in a more rational market than we've been before. We sustained and grew in the prior irrational market, so it's easier for us to improve and perform, I think, in the rational market that we're experiencing now. In terms of our approach, we look for good value ourselves based on our own positioning in the marketplace, and we have a little less concern with what others are doing. Obviously, we pay attention, but we make our own decisions and strategies based on what's in our best interest. So I'll say there's always going to be competitiveness there. There's always someone in there coming in aggressive, spending a lot, and we've over many years now been able to sustain and grow in that environment where others are outspending us because ultimately it comes down to putting players first and the quality of the user experience. I would say that the CAC for us has continued to improve and reduce. I think it's possible that some of our competitors are spending less than they did historically, a lesser percentage of their revenues on marketing. I also think it's possible that some of the smaller operators that were still spending exited the market, so that provides opportunity for those that are still here. I know we've improved massively in terms of our maturity as an organization and knowing where to get the players, what players are valuable, and how to make sure we're getting players that are long-term viable for us. So I think that investment we've made is really delivering for us the better value, and I can't really speak to how others are doing it, but I would say that I think the whole industry is probably getting better as well.

Yes, and the only thing I would add to that, Jed, is Richard is all of his points about our marketing and how much better we've gotten in finding high-value players in the right places and doing it at an appropriate cost. The same goes on the bonusing that you referenced is we've gotten a ton better at making sure that the right bonuses are going to the right players and that we're giving value to the players that deserve it most. I'm sure others in the industry have gotten better at that as well, but we're very pleased with how much better we are both on the bonusing side and on the marketing efficiency. Having said that, I think we've got the ability to be even better still.

One other thing to add on the marketing efficiency concept is that there were some recent articles about us that recently came out a day or two where we decided to pull back some affiliate spend in some markets. The reason why we did that is ultimately we want to have the flexibility to spend more with affiliates in other markets, making sure we focus on the markets where we get the best ROI. Secondly, there are other channels in the markets where we may have pulled back that we see opportunities to do other types of channels to acquire customers. So we're constantly looking at the data and evaluating the right opportunities to deliver the best ROI for us in those markets.

Great. And then just real quick on the back half guidance, should we and the fourth quarter is going to be your high watermark for EBITDA in the year.

So just maybe a couple of things we do. We expect marketing spend to be higher in Q3 and Q4 than it was in Q2. For all these reasons that Richard talked about, we just see a lot of opportunity to acquire more players that are at very reasonable prices. I'd expect that revenue in Q3, our midpoint of guidance for revenue in Q3 would be lower than Q2. And then Q4 would be the high watermark for revenue and certainly possible that Q4 could be the high watermark and EBITDA for the year as well.

Thank you.

Thanks, Jed.

Our next question comes from Jordan Bender with Citizens JMP. Jordan, the line is now open.

Good afternoon, everyone. I want to follow up on Chad's question there on spending money to gain more customers. Is the talk around marketing increasing in the back half of the year or just you being opportunistic based off of kind of some of those trends where you're acquiring easier or was this planned spend just ahead of when the more important periods of the year? Thank you.

I think it's a combination of things. As you point out, some of it is event and seasonally driven, as Richard pointed out in his prepared remarks. Then, I think we highlighted again the Olympic campaign that we have going on in Canada here in Q3, and that is driving some increased costs. Obviously, there's a lot of opportunity around the start of football season to put money to work. It's more dynamic than it is opportunistic. Our marketing team has done such a fantastic job of driving down costs and finding the right place to get new players that makes sense for us to make some additional smart investments in marketing. It’s not in response to any competitive forces as much as it is leaning into what's going really well for us and driving more user count for future year growth.

And just to add, Jordan, we keep it simple. We just modify based on the value of the players and the cost to attract them.

Got it. Okay. And then, from my question, just given the relative size and scale of the company now and the inflecting free cash flow, are you getting to a point where it makes sense to start bringing in some of your tech-stack that you don't own in-house? Thank you.

Well, we actually are off almost all the tech stack. We're really heavily invested in all kinds of technology and features from the apps and player account management system. We built poker. We have our promotional rewards engine in-house. It's really innovative and unique in the industry. The only thing we haven't brought in-house is the sportsbook platform, which we integrate through can be for many years. As I've shared previously, our philosophy on that relationship is that we'd like to go sort of yet the bread and butter from can be. We have a development team internally that adds our own flavor of innovation at the top with the sportsbook. We get the benefit, I think, of fundamentally strong core technology. We differentiate by building our own features on top of it, which is things like the squares of works and the player props things we did last year that really worked well as well as new ones in development. So, there really isn't a plan to bring it in-house at the moment; certainly, our sportsbook is not being in-house. But everything else we have developed in-house. And as you may know, we are the poker platform we've been developing as well. So again, we have a very robust and thorough technology system in-house. Really, I would say 95% of everything is in-house and we don't have in-house that maybe some others do is Sportsbook, whereas we have a lot more in-house in other areas that I think most of our competitors do.

Understood. Thank you very much.

Thanks, Jordan.

Our next question comes from Mike Hickey with Benchmark Company. Mike, your line is now open.

Thank you. Hey Richard, Kyle. Great job on the quarter, guys. Two topics. I guess the first topic is Latin America. Sorry if I missed this, but can you give us some color on sort of LatAm as a segment in terms of revenue and EBITDA contribution, whether it's a quarter for the first half or maybe how you're thinking about it for the year? If you can't give EBITDA obviously comment maybe just if it's plus or minus would be helpful. And then before I jump in there kind of just the last piece on Latin America which are in Pannon, like maybe you're incrementally more cautious on the entry into Brazil. Curious if that's the right read through there and maybe any sort of update on the regulatory framework and maybe the challenges that you see in that market?

Great. Thanks, Mike. So, on Latin America, obviously been highly successful for us. We're really excited about the Peru launch that just happened here. But the main driver of our growth right now is Colombia. I'm also very excited about Mexico. So today, or at least in Q2, I think Latin America makes up close to 15% of our revenue now, so really nice contributor. That's been growing faster than our North American business. I think that is likely to continue for some time, given the launch of Peru and Mexico is starting to pick up some momentum. In terms of profitability, Latin America absolutely is nicely profitable for us. Latin America total has higher gross margins than most of our North American markets, so strong growth in Latin America is nicely incremental for us and incremental for the bottom line. But I'll stop short of splitting out your EBITDA by market or by territory. And then Richard, you want to comment on Brazil?

Sure. Yes. For Brazil, Brazil is a large, exciting market. There's lots of moving parts there. It's very important that we sort of remain disciplined and more thoughtful about how we approach the market. I think we've demonstrated and have it's very clear and proven approach for how and when we enter new markets. We'll plan to update you as time goes on. On Brazil, I will say that being first to launch in that market as a regulated operator is like winning a gold medal in the Olympics, as there are a lot of operators already operating there for many years that are already unregulated gray market that can make this transition. We're the first ones in the market. So rather than being first, it becomes important for us to be the best when we decide to enter a market, and we'll keep you updated on our plans.

Nice. Very helpful. The second topic, just on the regulatory piece, thinking sort of Delaware and Illinois. Delaware, obviously a huge success for you guys. Do you feel like now, Richard, you sort of have a sustained licensing advantage? I mean, it was sort of challenged to bring in multiple operators. It looks like that was shot down. Do you feel like you're in a position here where you're comfortable, or are we going to have to worry about sort of a continual flow of challenges on the sort of the monopoly that you have? And then on the Illinois side, I guess just more on the tax side, are you guys more comfortable today that the idea that there could be a contagion here with other states also raising taxes? Like, do you think that's still a concern for investors, or do you think we're more in a comfortable spot than maybe a month or two ago?

I'll address both questions, and Kyle may have additional insights. Regarding Delaware, our success leads us to believe that further lobbying efforts are likely. Nonetheless, we're confident that maintaining the current approach will yield the best results for the state. We are dedicated to collaborating with the lottery and other key stakeholders to show that this operating model has been beneficial for Delaware and will continue to be. If we keep performing well, it strengthens the case for maintaining the same structure. Concerning Illinois and the potential for the graduated tax to set a precedent, I've been in this industry for a while, and each state has its unique political landscape, competitors, and financial considerations. I believe this situation is more of an isolated case. Raising taxes can sometimes result in decreased revenue for the state, as it might empower unregulated operators and sweepstakes companies, which could limit the state's revenue generation. It's crucial to proceed with caution in these matters. Each state is different, and I don't see any established trend; this appears to be a one-off situation.

Thanks, guys.

Thanks, Mike.

At this time, there are no other questions registered in the queue. There are no questions registered in the queue at this time. I'd like to pass the conference back over to our hosting team for closing remarks.

We appreciate the time today and we'll look forward to having our next conference call for Q3.

That will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.