Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rivalry Corp (RVLCF, Financial) posted the strongest net revenue margin in company history at 62.5%, supporting 22% year-over-year growth in net revenue.
- The introduction of Rivalry Token has already generated $1.7 million in revenue and is expected to continue contributing throughout Q3 and Q4.
- The company has successfully launched higher-margin products like Same Game Combos and pre-made parlays, which have improved sportsbook hold and driven net revenue.
- Operating expenses decreased by 5% year-over-year, with significant reductions in general and administration (8%) and technology and content (31%) costs.
- Rivalry Corp (RVLCF) has maintained a strong focus on operational excellence, performance culture, and rapid iteration, enabling quick adaptation to new opportunities.
Negative Points
- Betting handle decreased by 22% year-over-year, from $112.2 million in Q2 2023 to $87.8 million in Q2 2024.
- Gross gaming revenue declined by 12% year-over-year, indicating pressure on overall betting activity despite margin improvements.
- The company's share price performance has not met investor expectations, reflecting potential concerns about long-term growth and profitability.
- Rivalry Corp (RVLCF) acknowledged strategic missteps in focusing too much on low-value players, which has elongated the path to profitability.
- Net loss for the quarter was $5.8 million, a smaller improvement than expected, partly due to $0.5 million in interest expense on the convertible debenture.
Q & A Highlights
Q: Can you elaborate on the $1.7 million revenue from Rivalry Token in Q3? Is it gross gaming revenue or net revenue? How do you expect it to ramp up throughout the year?
A: Steven Salz, CEO: The exact accounting treatment is not specified yet, but this revenue is essentially cash in hand. Users have pre-purchased the token, similar to pre-ordering a book. We expect to show more than $1.7 million in Q3 and another meaningful amount in Q4, making it a core part of our revenue profile for the remainder of the year.
Q: Can you provide more details on the B2B licensing opportunity? Is it an exclusive opportunity, and do you expect more B2B opportunities?
A: Steven Salz, CEO: We are focusing on a relationship that will distribute our games globally through an aggregator and another potential opportunity in a large regulated market, which may be more exclusive. The process involves obtaining licenses to become a supplier of gaming content, which is time-consuming but progressing.
Q: How do you plan to achieve profitability by the end of the year? What are the key levers?
A: Steven Salz, CEO: We are driving margin improvement, cutting costs, and leveraging new revenue streams like Rivalry Token. The focus on VIP players will also contribute significantly. We expect these initiatives to start bearing fruit in Q4, giving us confidence in our liquidity and profitability goals.
Q: What is your perspective on the Brazil market and other new major regulated gaming markets?
A: Steven Salz, CEO: The Brazilian market is still under evaluation due to uncertainties in the licensing regime. We are satisfied with our current geographies and see a higher return on invested capital in our existing markets.
Q: Can you provide more details on the financial results, particularly the impact of margin improvement on overall betting activity?
A: Demi Abidogun-Benson, Interim CFO: Betting handle was $87.8 million in Q2, a 22% decrease year-over-year. However, net revenue increased by 22% to $4.7 million, driven by a record net revenue margin of 62.5%. Operating expenses decreased by 5%, contributing to a $1.3 million year-over-year improvement in loss from operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
