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Esports focused betting platform Rivalry recorded record highs in its latest earnings report, covering FY2022, Q4 2022 and preliminary results from Q1 2023. Additionally, the company is raising $7.3 million (or $10 million CAD) through a strategic funding round led by bookmaker Pinnacle.
This is the second quarter in a row where Rivalry has recorded record-setting fiscal highs. Unlike many companies in the industry, Rivalry is thriving during this esports winter.
Note: Rivalry reports its earnings in CAD. Figures have been converted to USD for this report unless specified otherwise.
Rivalry’s financial performance
For the four quarters ending on December 31, 2022, Rivalry recorded triple-digit growth for its betting handle (+198%), revenue (+140%) and gross profit (+349%).
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October was Rivalry’s first ever net-profitable month. However, Rivalry has not quite passed the threshold for profitability for its FY2022 results. The company’s net loss for FY2022 was $22.8 million was greater than 2021’s net loss of $17.8 million. Compared to 2021, Rivalry roughly doubled its spending on marketing and administrative costs.
Q4 of 2022’s betting handle totaled $61.5 million — 36% of Rivalry’s annual total. Similarly, the final quarter accounted for about 35% of annual revenue. Major esports tournaments like League of Legends Worlds, CS:GO’s IEM Rio and Dota 2’s The International took place during Q4 2022, driving increased betting volume. Net loss for the quarter totaled $9 million, however about $6 million of this gap is a result of non-recurring items.
However, fewer big ticket events have not stopped Rivalry from growing. In its preliminary results for Q1 2023, Rivalry’s betting handle reached $88.1 million, beating Q4 2022’s previous record by 43%. Moreover, the betting handle grew by 199% compared to the same period last year — highlighting Rivalry’s positive momentum. The company achieved these results with 10% YoY reduction in marketing spend, sparking a nearly 50% reduction in net losses YoY ($2.6 million from $4.8 million).
Investment inflection point
Alongside its financial reporting, Rivalry also announced new funding via a non-brokered private placement. Long time partner Pinnacle led the round with other technology and payments stakeholders participating. Rivalry will issue up to 6,666,666 subordinate voting shares priced at $1.50 CAD each. The investment will gross the company up to $10 million CAD (about $7.3 million USD).
“We believe the parties and terms of the investment at this inflection point for our business, and within the context of the current challenging market environment, represents a significant vote of confidence in our one-of-a-kind team, market strategy, and unique ability to execute within this emerging vertical,” said Steven Salz, cofounder and CEO of Rivalry, in a letter to shareholders.
“[Rivalry]’s long-time focus on product innovation, brand equity and next generation consumers is disrupting traditional ways of thinking in the industry and blazing a trail for industry economics that were previously not thought possible. As a long-standing commercial partner of Rivalry, we’ve had a front row seat to their incredible growth and are confident in the company’s trajectory,” added Paris Smith, Pinnacle CEO.
Rivalry’s differentiated approach
In its shareholder letter, Rivalry highlighted the growing problem of user retention: “Acquiring, engaging and retaining a habitually transient customer base is only temporarily solved with the provision of player subsidy. In this model, competitive advantages are dictated by balance sheets instead of innovative products and experiences.”
By comparison, Rivalry argues its growth is a result of a differentiated product, brand equity among fans and tailored strategies to target specific demographics and communities.
Rivalry’s userbase is both young and growing. 97% of active users are Gen Z or millennials. Meanwhile, the company reported 1.5 million total registered users. Additionally, the company is expanding into new markets. It acquired licenses to operate in Ontario in April 2022 and Australia in May 2022.
While company will continue to invest in its esports products (which accounted for 90% of its sportsbook handle in 2022), it has diversified its offerings. Rivalry is gaining momentum in traditional sports betting and it added 90’s inspired casino product, Casino.exe, in Q4 2022. Earlier in 2022, it added mobile esports to its platform.
For 2023, Rivalry is focusing on continued product development, launching a mobile app, and geographic expansion. The company also plans to further invest in premium content, its creator program and community activations.
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