Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Second quarter revenue was $220 million, up 34% year over year, marking a quarterly record.
- EBITDA improved significantly to $21.4 million, a $20 million increase year over year.
- iCasino revenue grew more than 40% year over year, and online sports betting revenue increased by over 25%.
- The company added a record number of first-time depositors in both the United States and Latin America while reducing marketing expenses.
- Revenue from markets outside of Illinois and Pennsylvania accounted for 59% of total revenue, the highest since going public.
Negative Points
- The new graduated tax rate in Illinois is expected to have an annual impact of less than $2 million on the company.
- Latin American ARPU was down 2% compared to the prior year period despite strong user growth.
- Marketing spend is expected to increase sequentially in the third and fourth quarters, reflecting higher investments for the Olympics and football season.
- The company exited the Connecticut market, which offsets some of the growth from new markets like Delaware.
- There are ongoing concerns about potential future lobbying efforts to alter the operating model in Delaware.
Q & A Highlights
Q: Can you talk through the impact of the Illinois tax increase and how it affects your managed service agreement with Rush Street Gaming?
A: The graduated tax rate has a less than $2 million annual impact on us at current revenue levels. The competitive intensity in Illinois is expected to decline due to the higher tax rate, which may benefit companies like ours that focus on customer experience and retention. - Kyle Sauers, CFO & Richard Schwartz, CEO
Q: How do you view the flow-through for the second half of the year, given the strong performance in the first half?
A: The first half's EBITDA improvements were partly due to lower marketing spend. We expect marketing spend to increase in the second half, impacting flow-through. For the full year, we anticipate a low to mid-30% range for flow-through. - Kyle Sauers, CFO
Q: Have you seen any changes in customer acquisition costs for sports betting versus iGaming?
A: We've seen improvements across all marketing categories, becoming more efficient in acquiring players. The market has become more rational, and our investments in technology and marketing tools have paid off. - Richard Schwartz, CEO
Q: Given the success in Delaware, do you anticipate any further challenges to your operating model there?
A: While we expect future lobbying efforts, we remain confident that the current model is in the best interest of Delaware. Our strong performance should help maintain the existing structure. - Richard Schwartz, CEO
Q: Can you provide an update on your Latin American operations, particularly in Mexico and Brazil?
A: Latin America now makes up close to 15% of our revenue, with Colombia and Mexico driving growth. We are cautious about entering Brazil due to regulatory uncertainties but remain optimistic about the market's potential. - Kyle Sauers, CFO & Richard Schwartz, CEO
Q: How do you plan to manage marketing spend in the back half of the year?
A: We plan to increase marketing spend in Q3 and Q4, driven by events like the Olympics and the start of the football season. Our marketing team has been effective in driving down costs and finding high-value players. - Kyle Sauers, CFO
Q: Are you considering bringing more of your tech stack in-house given your current size and scale?
A: We already own most of our tech stack, including player account management, poker, and promotional rewards engines. The only major component we don't own is the sportsbook platform, which we integrate through Kambi. - Richard Schwartz, CEO
Q: How do you view the potential for other states to follow Illinois in raising taxes?
A: Each state is unique with its own set of considerations. While Illinois' tax increase is significant, we don't see it as a trend that will necessarily be followed by other states. - Richard Schwartz, CEO
Q: Can you provide more context on the performance and growth potential in Delaware?
A: Delaware has been a strong performer, generating four times more revenue than the previous operator. We recently added live dealer games and are excited about the upcoming football season, which should further boost growth. - Richard Schwartz, CEO
Q: How do you see the customer acquisition environment evolving, particularly for sports betting and iGaming?
A: The market has become more rational, and we've improved our efficiency in acquiring players. We expect to continue investing in marketing to capitalize on these trends. - Richard Schwartz, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
