Rivalry sets 2024 financial target amid Q2 ‘challenges’

'Unique' behavioral betting habits from Gen Z users posed a problem during the last quarter, according to the firm

Despite posting a net loss of $6.3m in Q2, Rivalry is looking ahead to the future positively with the expectation of becoming profitable in H1 2024.

Publishing its financial results for the three and six-month periods ended June 30 earlier this week, the Toronto-based esports, sports betting and media firm reported a 1% increase from the net loss of $6.2m it recorded in Q2 2022.

According to Rivalry, this can be attributed to a ‘select number of low probability esports and sports outcomes, alongside unique behavioral betting habits from Gen Z users’, which caused increased margin volatility and negatively impacted revenue, which combined with several one-time expenses expanded the company’s net loss.

On a more positive note, though, betting handle in Q2 was $112.2m, up $73.8m (192%) YoY (Q2 2022: $38.4m), with casino contributing $57.5m of the total in a traditionally slow quarter for esports.

Steven Salz, Co-Founder and CEO of Rivalry, commented: “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.”

Meanwhile, Rivalry reported revenues of $8.5m in Q2, a record result for a second quarter, representing an increase of $3.2m (60%) YoY (Q2 2022: $5.3m).

Furthermore, gross profit of $3.8m in Q2 was up $1.8m (86%) from $2.1m during the same period last year.

The company also continued to drive top-line growth to the business, including acquiring 44% more new customers YoY at a 41% lower cost of customer acquisition.

The betting behavior of Gen Z customers, though – one of the company’s core audiences – presented a problem during the last quarter, with higher margin volatility within sportsbook.

To combat this, Rivalry introduced an increase in higher margin product mix through the release of same-game parlays and upped its marketing efforts through various media channels to create more diversified betting across its product suite.

Salz explained: “Our position among young Millennial and Gen Z customers represents one of our greatest competitive advantages, but has also presented unique learnings regarding betting behaviors. 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 normalizing margin and seeing early results. And to contextualize 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.”

Looking ahead, Rivalry expects to reach profitability in the first half of next year – something previously alluded to in its Q1 results – driven through ‘consistent revenue growth, cost efficiencies, ongoing efforts to create a bespoke product, and brand entrenchment within internet culture and gaming’.

The firm also recently launched its new esports same-game parlay product, Same Game Combos, which enables users to combine multiple bets within a single match for a bigger payout.

This ‘groundbreaking’ product, touted as a first for the industry, isn’t the only new offering landing in the current quarter, however.

Salz added: “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.”

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