Good morning, ladies and gentlemen, and welcome to the Rivalry Corp. Q2 2022 results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Thursday, August 25, 2022. I would now like to turn the conference over to John Vincic. Please go ahead. Thank you operator, and good morning, everyone. Our speakers on today's call will be Steven Salz, Co-founder and Chief Executive Officer of Rivalry Corp., and Kejda Qorri, Chief Financial Officer. Before we begin, I would like to remind listeners that certain statements made during this conference call presentation may constitute forward-looking information and forward-looking statements within the meaning of applicable securities laws. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Rivalry Corp. and its subsidiary entities or the industry in which it operates to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this conference call presentation, such statements use words such as may, will, expect, believe, plan, and other similar terminology. These statements reflect management's current expectations regarding future events and operational performance and speak only as of the date of this presentation. These statements involve known and unknown risks, uncertainties and other factors, including those risk factors identified in the company's prospectus dated September 17, 2021, under the heading Risk Factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, other than as required under securities legislation. I'd now like to turn the call over to Steven Salz. Steven? Thank you, John, and thank you everyone for joining us. Although it has been relatively quiet over the summer since our Q1 report, I can assure you that the team has been very busy with the results of our work to become very clear over the coming months. We have a strong seasonal period ahead of us and various product level catalysts that we're excited about. Speaking to that seasonality, in our Q2 release, we included our July betting handle figures, which stood at $23.4 million, or nearly two-thirds of what we did in all of Q2. That is up 66% month-over-month and 162% year-over-year. August betting handle is trending strong as well, continuing our momentum in Q3. As we head into September, we see the kickoff of the regular season of the NFL. Although Rivalry continues to be esports heavy in terms of our betting activity, in Ontario, the Gen Z demographic we are effective at serving has more diverse interest than we see in some of our other jurisdictions where esports is more mature. We will be driving an authentically Rivalry effort in Ontario to participate in the NFL season action. September into early October, we'll also see the expected release of a third-party casino offering in our Isle of Man jurisdictions, player testing of new original game IP from Rivalry complementing Rushlane with anticipated full game release later in Q4, and an enhanced traditional sports betting offering to complement the arrival of the NFL season and gearing towards the World Cup in November. October sees two of the biggest esports events of the year, League of Legends Worlds and Dota 2, The International, where we will be actively. where we will be activating across all our markets in a meaningful way. The tail end of the month and into November is the CS:GO Major in Rio, Brazil. These CS:GO major events are typically four times a year and represent the biggest moments for CS:GO every year. The combination of these events across the top three esports titles globally, we expect to drive meaningful betting activity to all of our markets. It is during this October and November window that we anticipate the initial release of our originally developed mobile app in Ontario to help drive further customer activity and overall adoption. Moving further into November and December, you then have the World Cup. This is a universal sports fan moment globally that traditional sports fans and esports fans alike flock to. We expect World Cup activity over this period to drive further activity at Rivalry. In the midst of all this, I'm happy to announce today for the first time that we will be hosting an investor day early October that will highlight the tremendous growth of Rivalry over its first 12 months as a public company. All efforts I just noted in highlighting the key leadership across the company and providing even more detail on what's to come from Rivalry moving forward. This is all to say we expect to have a catalyst and performance-driven number of months ahead, punctuated by increased capital markets efforts to better daylight Rivalry to the investment community. Circling back to Q2, we launched in our first two regulated markets, Ontario and Australia. As noted then and on our Q1 call, in new markets, we start slow on spend, taking in feedback, conducting user testing, iterating against it and building brand awareness in parallel. As underlying key performance indicators hit our target range, we then increase spend accordingly. The most critical piece of our strategy is cost-effective customer acquisition. Our peers will often do the inverse of this, deploying their highest spend in the initial flurry of a market launch through promotions, bonusing, and various marketing deals, which then tapers off over time as they see their competitors in the market cool off on spend as well. Initial results and commentary out of Ontario validates our approach. It has been clear that there was little to no first-mover advantage that justified spending heavily at launch. We will continue to take our more methodical approach that suits our strategy and our customer base. This crawl, walk and run strategy, detailed more heavily in our August investor deck, is a playbook that has delivered results over these last years, prioritizing operating leverage so we can deploy spend to scale a market with compound effects rather than linear. Further, as we have noted in the past, in the esports calendar, Q2 and Q4 are seasonally slower quarters, while major esports events typically fall in Q1 and Q3, making those quarters seasonally stronger. On that basis, we would expect to see sequential declines in our key metrics in Q2. That was very modestly the case this quarter, with our betting handle of $38.4 million down marginally from Q1's all-time high of $40.2 million. More accurately, though, to reflect the relative seasonality, our betting handle nearly doubled year-over-year from Q2 2021. Positively, we overcame the seasonality effects to deliver sequential growth in several key items. Our revenue of CAD 5.3 million was our best quarter ever, and gross profit of CAD 2.1 million was also a record, nearly equaling full year 2021 gross profit is up 206% year-over-year and 201% sequentially. This demonstrates the level of profitability we are capable of generating. Kejda, our CFO, will detail more what can be expected on a go-forward basis at our stage. At this point, I will turn the call over to Kejda to review our second quarter results in greater detail. Thank you, Steven. Betting handle was $38.4 million in the second quarter, representing a year-over-year increase of 98% from $19.4 million in Q2 2021. Handle was modestly down sequentially by 4% from the record high of $40.2 million in the seasonally strong first quarter of this year. Handle in Q2 was the second highest in our history. As we have said in the past, we view betting handle as an important metric and the best indicator of overall betting activity and the long-term earning potential of the business. Handle grows as a result of an increase in our worldwide customer base and the number and size of the bets they place. With Ontario and Australia being new markets for us, the growth in Q2 was driven primarily by our existing international markets, indicating increased user counts and engagement levels. Because of the seasonal nature of major esports events, our main focus is on year-over-year trends as the best indicator of our progress. We are pleased to have nearly doubled our handle compared to the second quarter of last year. We expect our traditional seasonality patterns to continue through the second half of this year, with the third quarter already looking very strong. Turning to revenue, as Steven mentioned, the $5.3 million of revenue we delivered in the second quarter was the highest ever for Rivalry. The rate of increase was 60% year-over-year and 11% sequentially compared to the first quarter of 2022. Similarly, gross profit of $2.1 million was also a record for us, up 206% from a year ago and 201% sequentially. As a percentage of revenue, gross margin was 39%. These revenue and gross profit results may appear to defy the earlier statements about a seasonally slow second quarter. At this stage of our business, we expect to see a certain amount of volatility from one quarter to the next on gross profit. Our business model is to generate a spread or a margin on betting handle. We have been successful at generating a positive margin on our sportsbook, but the percentage can change from one period to the next. This can result in two quarters with a similar handle, but differences in revenue and gross profit. In Q1 of this year, we considered our 14% gross profit margin to be at the lower end of the range we would expect to achieve. This quarter's 39% gross profit margin is further towards the higher end, given our current scale. We're likely to continue to see swings from quarter to quarter at this stage. The model of sports betting is such that as total liquidity or the total volume of bets increases, the potential for loss or corrections on the sportsbook declines. Simply, it's easier on average to balance your sportsbook with more bets. This means at scale, our margin will become more consistent, and we believe gross profit in particular will start to look much more comparable to the year-over-year growth rates seen in handle and revenue, and generally trend higher as a percentage of our revenue. As we roll out casino and see increased product diversity as well, this should both help blunt the impact of more volatile sports betting margins and reduce the impact of seasonality in the business. Our operating expenses reflect our strategy of investing in growth by scaling the organization. Once again, the majority of the year-over-year increase is explained by the two largest items. First, marketing, advertising, and promotion expense, which is aimed at attracting and retaining users in existing markets. Some initial spend in our new markets, Ontario and Australia, which should start to bear fruit in future quarters as we continue to deploy our new market launch playbook. The second-largest item was general and administrative expense, which largely reflects a higher headcount and public company costs required to build the business. Investing in innovation in our people is core to creating long-term success and operating leverage at Rivalry. Lastly, I will touch on our liquidity. We had CAD 27.8 million of cash resources June 30, 2022. This amount includes cash and cash equivalents of CAD 24.1 million, plus restricted cash of CAD 3.7 million. Restricted cash represents amounts that are contractually restricted and related to player deposits and player protection funds. We remain confident that we have the financial resources to continue to fund our growth strategy. At this point, I will turn the call back to Steven to discuss our outlook. Thank you, Kejda. I'm proud of the disciplined execution across the team. We remain committed to delivering a business model on a market-by-market basis, whose foundation is rooted in increasing operating leverage. This is a term we use a lot, both externally and internally, because it reflects our MO from day one at Rivalry. A business model that can show incremental margin dollars per OpEx dollar per market is one that can create compound growth at scale that leads to overall profitability. In markets we've been active in at Rivalry for 2+ years, we have recently begun to see bottom-line profitability on a standalone P&L basis, something we describe in our latest investor material as well. Given the early innings of our growth trajectory that we believe we are in, we will continue to selectively launch in new markets. What this means is the company P&L is not yet profitable. As our new markets spool and also trend towards bottom-line profitability on a standalone P&L basis per our longer-standing markets, and the weight of those more mature ones is greater than our newer ones, we expect to reach profitability as a company. The strategy is working, and we are constantly edging closer to achieving our mission of building the defining betting experience for the next generation. With just over 80% of our customers under the age of 30 and the majority in their mid-twenties, it's our belief that the composition of Rivalry's customer base is among the most forward-looking across the industry. This positions us for a unique trajectory in a class of its own, rather than competing in the well-established model that serves a more mature and aging better demographic. We have a very exciting few months ahead of us, as I outlined at the top of the call, and we're looking forward to sharing even more in just over a month at our planned Investor Day. Please look out for more details shortly on that. Now I will turn it over to the operator to open up the call for Q&A. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any keys. First question comes from Adhir Kadve at Eight Capital. Please go ahead. Good morning, Steven and Kejda. Thanks for taking my questions. First question is on the July $23 million handle generated. How do you kinda see that playing out over the rest of the quarter? I know you said August started off really well, but maybe in September. Is there any downtime in the eSports calendar during those months before kind of seeing the ramp into October with the big marquee events? Rest of August should be pretty good, and August as well definitely has been great. September probably slows down a little bit, so because you do have the top three esports again being Counter-Strike or CS:GO, League of Legends and Dota and their big marquee event being in October, there is a bit of a quiet period in September. It's not overly significant, but definitely it'll be quieter than July and August for sure. It should still be decent and set up Q3 for being pretty successful still relative to our previous quarters. Okay, great. I know you guys kind of gave some color on the gross margins, and you'd kind of expect that to stay somewhat volatile as you guys kind of build this scale. What are your kind of expectations as we head into these big marquee events in terms of spend levels and you know, user acquisitions? How are you kind of thinking about that, as we head into the back half? Yeah. I mean, like, our gross profit is essentially like a proxy for NGR, right? NGR margin across the industry averages maybe 4.5%. If you look at that gross profit figure versus the handle we did in the quarter, it's like north of 5%, which is definitely abnormal. I'd say like, Q1 was the other side, right? I mean, Q1 was like 1.5, 2%. I think we'll be somewhere probably between that range from an NGR gross profit perspective, which then translates to maybe like a 20%-35% gross margin band, we would hope to be in, but of course you don't really know until you get to the end of the quarter. In terms of the spend, definitely there's gonna be an increase in OpEx related to launch of NFL, which will basically come right at the end of Q3 from a spend perspective, but the NFL season goes into next year. We might, you know, get hit with some costs right towards the end of Q3, but it's not gonna be really represented in revenue and earnings until Q4 and then Q1 of next year. Around the marquee events esports-wise in October, yeah, there will be increased spend around those months, but it's a little more of a direct kind of one-to-one relationship between spending in those months and then getting return pretty rapidly in those months because the events are really just for the month of October, right? Yeah. It'll increase a bit, but some of it is definitely gonna be more direct and rapid return than yeah, I'd say more of the NFL stuff that'll linger through until next year. Got it. Maybe just shifting gears a bit, just, I know you guys have kind of put out a, like, you know, not a slower approach, but like a more calculated approach to some of the new regulated markets that you're in. What have you kind of learned over the last three months? You know, Ontario's been live for three months now. Yeah. What have you learned and, how do you kind of expect that inform your broader push into these markets? Yeah. Ontario and Australia are both, like, really, really different. I guess there's been similar experiences in both. Ontario was on, right? Because it was a really long-standing, large, successful gray market that converted to a regulated market, and the AGCO/iGO was really welcoming, and we think they made the right commercial move where they didn't penalize the gray market operators. They were grandfathered into the program so long as they were applying. I think what a lot of people have seen in the market is that those, like, entrenched gray market operators that transitioned to regulated operators were able to sustain decent market share. Then you had someone like theScore that had large, you know, let's say, media and app download footprint from their news and scores app for a decade, and they also found success converting it. I think it was both entrenched operators converting from gray to regulated, and they ended up holding more market share than I think many people expected. Then definitely what we had been saying leading into the Ontario launch and then on the annual call and I think the Q1 call is that the enormous dump of promotions and bonuses in the first month or two made it really difficult for sportsbooks to stand out from one another. You've seen in some of the results of some of the other operators that it didn't equate to returns in any way that justified that spend. I think we're happy with having been like extremely conservative on a relative basis with our spend. You're talking like CAD 200,000 from the launch of Ontario until today. That feels like it was the right move, and I think we're just gonna continue doing the same thing. Our strategy doesn't really change. We'll just continue being methodical, dialing in customer acquisition costs, and then until that point, we will not scale or increase spend. Yeah, we definitely saw a lot of people blow a lot of money and they didn't really get anything for it in the end. Like kind of any, you know, rough timelines as to when you'd kind of look to increase spend or is that kind of still TBD? No, I think like we're gonna be increasing on NFL just like as a one-off thing specific to grabbing a bit of market share there 'cause we are seeing a lot of interest around younger demographic in traditional sports, as we said in our opening remarks. Yeah, maybe a little bit will trickle in toward the end of Q3 and then part of that through Q4. I wouldn't expect anything from a scaling perspective probably until early next year. Okay, got it. Last one just on my side, and I'll pass the line. Yep. Just on the product development side, you know, on the casino side of the business and the mobile app, like where are you in that development? Yeah. I know you said we'll be expecting the mobile app to come live soon. Are you kind of in a product testing phase? Or just give us a sense of where you are on that development pipeline. Yeah. There's basically like an MVP version of it that we're working through and it's going through development. Like it's in kind of its final phases with it probably being ready sometime in September. I think the one thing we maybe discounted was getting a regulated sports betting app approved in the App Store in a new regulated jurisdiction of Ontario is not the easiest thing in the world. I think that complexity we maybe discounted, and it's causing a slight delay of a couple weeks from our original expectation of like end of September launch to maybe sometime in October now. It's not massively like deviating from our initial timeline, but I'd say yeah, that has been unexpected sluggishness on App Store approval, but otherwise it's fine. From the casino side, we kind of look at it as just like one pillar where we have Rivalry Games, which is both original developed casino IP that we do in-house, which is Rushlane, and then this new game that it's gonna be going into player testing shortly as well, sometime around somewhere September probably timeline. We do have third party casino games we're starting to add as well. It's a little different though. We're not just kinda dumping, you know, iframe of 100-150 slots. We're integrating it in like a pretty authentically Rivalry way. It is in a bit of a soft launch, like people outside of Canada can see it. We haven't really pushed it that hard. We're integrating third-party casino games that we think our customers will like in a way that is very branded, very Rivalry. It's kinda like a mock Windows 95 style computer. It just adds a different level of kinda gamification and engagement to actually participating in these games. That's kind of how we look at games is mixing original IP with tried and true stuff that people like from third-party operators that we can integrate in a way that feels like our own. That's continuing to roll and we'll be talking about more of that in September probably. Awesome. I'm looking forward to seeing them. Thanks guys. Appreciate all the color. I'll pass the line. Cool. Thank you. The next question comes from David McFadgen at Cormark Securities. Please go ahead. Oh, hi. Just a quick question on Ontario. I was just wondering, are you guys happy with your performance so far? 'Cause as you spoke earlier, there have been some operators that have found Ontario particularly difficult. I was just wondering how does it live up to your expectations. Yes. I think relative to the spend that we put out, it's been okay. I'd say that definitely it's been slightly more challenging than we expected for sure on a couple of different fronts. I wouldn't say from like purely a customer acquisition perspective, more the some of the layers of regulation in terms of how you can market, what you can say, what you can't say. Then also from a customer experience perspective, there is a lot of additive friction in the onboarding and overall just like customer funnel that's different than what we've experienced in other jurisdictions. I'd say like we've definitely had a little more challenges on that side than we originally anticipated. Again, like relative to total spend, which has been pretty small, I wouldn't say we're like overly disappointed, but yeah, certainly it's been somewhat different than we anticipated over the first couple months. Okay. What about Australia? How's that launch going? Yeah, that one's slightly better. It's a little bit more of a mature regulated market where it's Yeah, there was maybe a little less fumbling around of trying to figure out the ins and outs of the regulatory regime. Yeah, that one's been fine. Same thing. Pretty modest spend. I'd say cost to customer acquisition I think in there has been a little more within like the band that we would anticipate at this stage of a market launch, but also launched mid-May, you know, August, so it's still relatively novel for us. We're probably one to two quarters away from seeing any kind of like torque or leverage there. Okay. Have you seen any change in the competitive intensity in the gray markets that you service? Not really, no. No? Not that I can think of. Just status quo. Okay. Yeah. All right. Thank you. I mean, like the ones that we're in that are gray, they've been gray for so long. It's just. Yeah, I mean, it's. Those are markets we're in where there's dozens or 50 to 100 operators, right? I mean, kind of anybody can be there. Yeah. They're kind of just status quo. Okay. All right. Thank you so much. Cool. Ladies and gentlemen, as a reminder, should you have any questions, please press star followed by one. Next question comes from Scott Sandler at RBCDS. Please go ahead. Hey, Steven. Good quarter. Thanks, Scott. Very, very nicely done. Couple quick questions. Some spending questions. How would you compare the marketing spend specifically in Q1 versus Q2? Was it higher, lower, about the same? Slightly higher. Q2 captured some of that like initial spend in Ontario or Australia, where there is gonna be a lag on return. It was modest, but our overall marketing spend relative to competitors is tiny. I mean, even if you look at our total marketing spend in this quarter. It's comparable to what some of the larger operators spend in a single digit number of days. You know, any kind of increase, CAD 400,000-CAD 500,000 across Australia or Ontario would nudge it up, and then you wouldn't really see it represented in top line. It was maybe like 10%-15% on that basis, but not overly significant. As I mentioned to Adhir, we're expecting end of Q3 to see a bit of a pop around the NFL, and then I would expect in Q4 also to see a bit of a pop around the major events in October and World Cup. Again, as I said also, like we expect to see a more kind of direct return on that spend within the same quarter rather than something that's delayed. Understood. I've got a question. One of my clients wanted me to ask this, but I think you kind of partially answered it already. Just with respect to kind of estimated timeline to cash flow positivity. Yeah. to profitability. I realize that you said that it's almost like part of the business will get there sooner, but you'll be busy deploying into new markets, which will offset that on a corporate level. Can you just speak to that a bit? If there is any kind of ballpark timeline for, say, cash flow positive for the company? Sure. For the company, it's a little difficult to predict. You know, it's honestly relatively simple, right? I mean, like Rivalry for sportsbook in its vintage is pretty early. We launched in late 2018, we're in late 2022, so we're a couple of years in. Therefore we have more new markets than mature markets. The mature ones, as we said, that are 2+ years in, a number of them are profitable on a standalone P&L basis, but the new ones do require investment to grow, and so they're not. In time, the weight of mature will be greater than new, and then Rivalry as a whole will be profitable. It's really just dependent on kind of market dynamics. Like, we're also not ignorant to what's happening from a macro perspective and overall cost of capital changes that have occurred in the last 12 months. I think we're observing both, but we definitely have like a bias for growth right now and the intention is to continue to deploy new markets where we think we'll find success. Again, maybe we'll get a little more detailed about breaking out individual markets that we're seeing standalone P&L success in if we're gonna continue launching a new one. It's yeah, it's hard to give like an exact predictor on company level profitability. Okay. Yeah. Great. Thank you very much. All right. Welcome. The next question is a follow-up from Adhir Kadve at Eight Capital. Please go ahead. Hey, guys. I just wanted to ask kind of one more last question, just on the back of what you just mentioned, Steven, on the macro backdrop. How do you get a sense of the spending levels from esports bettors in a more uncertain macro backdrop? I mean, given, you know, inflation pressures and other things in the macro, how do you see the esports bettor kind of, you know, behaving in that environment? Yeah, I mean, when you were 23 or 24, were you worried about like inflation and, you know, macroeconomic backdrops? Maybe you were given what you do for a living. I'd say like what we've seen is like zero change or zero deviation in spending behavior. Like what we've said to a lot of investors is they're like one economic cycle away from being impacted. They're in like their early to mid-20s, maybe first or second job, likely no dependents, renting versus owning. It just isn't really impacting them. You know, it reminds me like myself, like I was 18, 19 in 2008. I was, you know, investing in the market kind of for fun, but like I was completely unimpacted by what was happening then. It was more just like an interesting thing that I was engaging in, but it had no bearing on my life or what I did. You know, now I'm in my early thirties and I've got a mortgage and I've got two kids and all that kind of stuff, and then this is a thing that has me thinking differently and has me maybe spending differently personally. Yeah, our target demo at Rivalry, the next economic cycle would be one where we expect consumer habits to change. Currently we've seen absolutely nothing. That's been consistent so far. Okay, gotcha. Yeah. Just one last one, just on the big marquee events. You kind of said you'll have some activations and a lot of news coming in on the back of that. Can you just kind of unpack that for us a little bit? What kind of activations will you be doing? How will Rivalry kind of be visible during those events? Yeah. Around like Worlds and TI across all of our major jurisdictions, like given the level of engagement we have with our brand partners there, like we just do a lot of really specific engagements with our community. I mean, maybe more specific and speak to like the CS:GO Major in Brazil. You know, we'll have like a physical box there. We'll be hosting partners there, putting on different events, cosplayers, after parties. I'd say for League of Legends and Worlds, same thing. We'll probably do watch parties in all the key markets. Something we're considering for Toronto maybe because Riot was supposed to host the semifinals of Worlds in Toronto and then they pulled out due to, I think, COVID issues or just visa issues. There's now like kind of a void or a gap in the city. I think it's a lot of that. Like, everything Rivalry does is very like grassroots and community and like elevating partners plus their fans in a meaningful way rather than relying on maybe more traditional methods of marketing. It'll be consistent with that across the board, across all jurisdictions. Then on the NFL, which is coming a little bit sooner, I think people will start to see, especially people that live in Toronto, a lot of the different stuff we're doing. I think we'll have a more discreet announcement around that shortly. Got it. Thanks, guys. Appreciate it. Of course. Thank you. There are no further questions. You may proceed. Thank you everyone for joining us, and have a great day. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.