Esports betting operator Rivalry continued to post a net loss in the third quarter despite posting record revenue of $8.7m (£6.9m/€7.9m), while the company’s overall loss also narrowed increased.
Sales rose 22.5% year-over-year in the third quarter. Rivalry reported growth in both sports betting and gaming in the three months ended September 30.
However, increased operating costs and exchange rate losses offset the increase in sales in the third quarter. This meant the total loss for the quarter widened to $6.0 million, compared to $5.6 million in 2022.
Looking back on the third quarter, co-founder and CEO Steven Salz praised Rivalry for revenue growth in a “challenging” capital markets environment. He said this will benefit the company for further growth in the fourth quarter and beyond.
“We are proud to have delivered a record quarter in a capital market environment that is challenging for growth companies and at the same time to have demonstrated cost discipline,” said Salz. “Now, with our recently announced capital injection, we can get back on the offensive while maintaining our path to profitability.”
The increase in betting stakes goes hand in hand with the growth in sales
Looking more closely at the three months ending September 30, sports betting was Rivalry’s primary source of revenue. Sales in this segment rose 42.6% to $8.7 million in the third quarter.
Rivalry also reported growth in its casino business: revenue increased by 50.0% to $1.5 million.
Elsewhere, Rivalry said total betting turnover across its offering rose 50.4% to $105.7 million. Casino games accounted for $50.4 million of that, with recent launches contributing, according to Rivalry, including the launch of the Casino.exe brand in Ontario, Canada.
Cost increases compared to the previous year have a negative impact on the bottom line
Turning to expenses, cost of sales fell 5.9% to $4.8 million in the third quarter. However, operating expenses rose 14.8% to $9.3 million. This resulted in an operating loss of $5.3 million, less than the loss of $6.0 million in 2022.
Rivalry also recorded foreign exchange losses of $367,457 with interest expense of $4,872. On this basis, the operator was left with a net loss of $5.6 million, an improvement from $6.0 million last year.
However, taking into account the negative currency translation difference of $363,133, the total loss increased to $6.0 million. Last year, Rivalry posted a shorter overall loss of $5.6 million after benefiting from a positive foreign exchange difference of $401,071.
Brighter picture for the year as a whole
Looking at the impact of the third quarter on year-to-date performance, it was overall a positive outcome. Rivalry reported revenue of $29.2 million in the nine months ended September 30, an increase of 69.8%.
Of this, sports betting accounted for $24.3 million, an increase of 50.0% year over year. Gaming revenue reached $4.9 million, increasing 345.5% from $1.1 million in 2022.
Cost of sales increased 29.0% to $16.0 million and operating expenses increased 19.5% to $28.2 million during the period. However, the impact of sales growth was such that the operating loss narrowed from $18.8 million to $15.0 million.
Rivalry reported a foreign exchange loss of $190,423 with interest expense of $12,435. This resulted in a net loss of $15.2 million, an improvement from last year’s loss of $18.8 million.
Taking into account the negative currency translation difference of $1.4 million, the total loss was $16.7 million, but still below the $19.1 million in 2022.
“Years of consistent performance, several quarters in a row of flattened operating costs, triple-digit year-over-year growth in all core metrics year-to-date with record high average flows per customer, average revenue per user and record low costs.” “I am deeply pleased with customer acquisition over the same period the future of Rivalry,” said Salz.
“It is this proven operating leverage, supported by an improved sports betting margin profile that results in more revenue per dollar wagered, and now fueled by growth capital, that creates a significant opportunity set for Rivalry.”
“It is this combination that gives us confidence to confirm our profitability forecast for the first half of 2024.”