Rivalry confident in product roadmap for 2024 profitability

Rivalry expects to achieve profitability by H1 2024 after recording another quarter of revenue growth in Q2 2023, momentum which the firm expects to stay consistent into next year.

The Canada-based firm – active in the Ontario and Australian markets, with a focus on esports – reported group-wide revenue of CAN$8.5m to its TSX investors, up 60% on corresponding Q2 2022 revenue of $5.3m.

This drove a gross profit uptick of 87% from $1.8m to $3.8m, although the group’s net loss did increase slightly by 1% to $6.3m ($6.2m), a change which Rivalry attributed to several key factors.

Specifically, the company cited ‘several one-time expenses’ in tandem with increased margin volatility as the primary reasons. The latter was caused by a combination of low probability on sports and esports outcomes during the quarter and ‘unique behavioural betting habits’ among the group’s target demographic of Gen Z users, Rivalry explained.

Steven Salz, Co-Founder and CEO of Rivalry, said: “In Q2 we delivered a nearly three-fold increase in handle year-over-year. Increased marketing sophistication and enhancements to our core product have led to operational improvements, increased player wallet share, and a material year-over-year reduction in cost of customer acquisition, positioning us well in the coming quarters. 

“The growing strength in these underlying fundamentals continues to validate Rivalry’s global brand leadership in esports betting, and more broadly, in delivering a world class online gambling experience for the next generation of fans.”

Despite the increase in loss, Rivalry noted that overall expenses remained ‘nearly flat’ during the quarter, with marketing expenses in particular reduced 6%. This contributed to its largely positive end to H1 alongside growth in betting handle.

This latter figure stood at £$112.2m, an increase of 192% from $38.4m the year prior, with the company closing Q2 with $14m in cash and no debt despite the marginal increase in losses. 

Two factors in particular have been cited by the firm as contributing heavily to continued growth in Q2. The first of these was customer loyalty among its Gen Z and millennial user-base, with customer numbers rising 44% but costs of acquisition falling 41%.

Salz has highlighted the significance of the Rivalry’s demographic profile to SBC in the past, citing how 80% of the group’s customers are under the age of 30, with the majority being in their mid-20s.

The group has sought to engage said millennial and Gen Z audiences with a tailored approach to marketing, embracing internet culture, memes and influencers. However, following this week’s Q2 update, Salz has acknowledged the challenges that come with this demographic targeting.

He added: “Our position among young Millennial and Gen Z customers represents one of our greatest competitive advantages, but has also presented unique learnings regarding betting behaviours. Generally we experience higher margin volatility within the sportsbook among this demographic, which impacted revenue this quarter. 

“That said, challenges like this come with our position at the bleeding edge of a demographic shift in online gambling, and it has also allowed Rivalry to learn more than other operators about what is needed to succeed among this coveted cohort. In the immediate term we have been tuning our operational initiatives to address normalising margin and seeing early results. 

“And to contextualise the upside potential of this work, at consistent industry average margins Rivalry would have been profitable in Q1 and Q2 this year against the betting handle we generated. 

“With these ongoing adjustments being made based on our learnings, alongside the general benefits scaling handle through growth provides to margin, we expect to reduce volatility, positively impacting bottom-line results, and propelling us to profitability in the first half of next year.”

In addition to its customer profile, Rivalry has also highlighted the expansion of its product offering as being vital to Q2 success, notably launching the Casino.exe mobile app in core market Ontario in March.

The integration of casino to its offering, which has thus far focused primarily on esports with traditional sports markets, also provided a solid boost during the quarter to the tune of $57.5m in betting handle, offsetting ‘historical esports seasonality’.

Back on the betting side of its business, a post-quarterly development saw Rivalry add same-game parlays – a popular betting type in North America – to its esports/sportsbook, styling the product as ‘Same Game Combos’.

Salz concluded: “We are keen to share a number of additional product releases coming in Q3, beginning with Same Game Combos, our own proprietary version of same-game parlays for esports, which we released just last week.

“This feature, and others arriving in the third quarter, strengthens our position at the edge of technical and product innovation, and more broadly, our ability to continue delivering a market-leading betting experience catered to young Millennial and Gen Z consumers. 

“We have barely scratched the surface of the feature set on our deep product roadmap, which we are confident will enable us to win this global generational opportunity in betting.”

Looking ahead to 2024, Rivalry anticipates profitability based on projections of continued revenue growth quarter-to-quarter, alongside slower cost rises, maintained management of expenses and ongoing product innovation.