Rivalry remains at net loss in Q3 despite record revenue

Rivalry Ltd., an emerging leader in the esports betting sector, has reported a net loss for Q3 2023, despite achieving record revenues of $8.7 million (£6.9 million/€7.9 million). The company also experienced a widening of its comprehensive loss during this quarter.

The revenue for Q3 marks a remarkable 22.5% increase year-over-year, driven by growth across both its sportsbook and gaming divisions for the period ending September 30. This highlights the resilience and upward trajectory of Rivalry, even amidst a competitive landscape within the gambling industry.

Nevertheless, the company’s increased operating costs coupled with foreign exchange losses offset the revenue gains. As a result, Rivalry’s comprehensive loss for the quarter expanded to $6 million, compared to a loss of $5.6 million in the same period last year.

Co-founder and CEO Steven Salz acknowledged the record revenue achievement despite the challenging conditions in capital markets that impact growth firms. He expressed optimism for forthcoming periods, citing the company’s strategic positioning for Q4 and beyond.

“We are proud to have delivered a record third quarter while exercising discipline on costs amid a challenging capital markets environment for growth companies,” Salz remarked. “Now, with our recently announced capital infusion, we will be able to go back on the offensive while still on our path to profitability.”

Significant Rise in Betting Handle Fuels Revenue Growth

Analyzing the performance metrics for the period leading up to September 30, it becomes evident that Rivalry’s sportsbook was the dominant revenue contributor, generating earnings of $8.7 million—a significant 42.6% increase. Additionally, the casino segment observed a substantial revenue growth of 50%, reaching $1.5 million.

Furthermore, total betting handle across Rivalry’s platform experienced an impressive surge, climbing 50.4% to $105.7 million. Of this total, $50.4 million was attributed to casino gaming, bolstered by strategic product launches, including the successful introduction of the Casino.exe brand in Ontario, Canada.

Cost Pressures Affect Profitability

Despite the strong performance, the company’s financials reveal that expenses played a critical role in suppressing profitability. The cost of revenue decreased slightly by 5.9% to $4.8 million in Q3, but operating costs surged by 14.8% to $9.3 million. This scenario resulted in an operating loss of $5.3 million, which, although reduced from the $6.0 million loss posted in 2022, highlights ongoing cost management challenges.

Additionally, Rivalry recorded a foreign exchange loss of $367,457 alongside $4,872 in interest expenses. This culminated in a net loss of $5.6 million, an improvement compared to $6.0 million last year. However, factoring in a $363,133 negative foreign exchange translation difference resulted in a comprehensive loss of $6.0 million, widening from last year’s $5.6 million due to a prior positive foreign exchange impact.

Positive Year-to-Date Performance: A Bright Future Ahead

Evaluating the cumulative performance over the first three quarters of the year, Rivalry has presented a largely positive narrative. The company recorded a total revenue of $29.2 million for the nine months ended September 30, marking an impressive 69.8% growth. Sportsbook operations accounted for $24.3 million, increasing 50% year-over-year, while gaming revenue skyrocketed by 345.5% to $4.9 million, up from $1.1 million in 2022.

Although the cost of revenue climbed 29% to $16 million, and operating expenses rose 19.5% to $28.2 million, the robust revenue growth allowed Rivalry to narrow its operating loss from $18.8 million to $15 million.

The company also faced a foreign exchange loss of $190,423 and $12,435 in interest expenses, leading to a net loss of $15.2 million—an improvement from an $18.8 million loss the previous year. After accounting for $1.4 million in negative foreign exchange translation difference, the comprehensive loss reached $16.7 million, but this was still a reduction from $19.1 million in 2022.

“Our sustained performance, disciplined operational expenditures, and impressive triple-digit year-on-year growth across core metrics instill a strong conviction in Rivalry’s future,” Salz concluded. “The proven operational leverage combined with an improved sportsbook margin profile resulting in increased revenue per dollar wagered and growth capital creates significant opportunities for Rivalry. This foundation gives us confidence to reaffirm our profitability guidance for the first half of 2024.”