Good morning, ladies and gentlemen, and welcome to the Rivalry Q3 2024 Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, you will need to press Star zero for the operator. This call is being recorded on Friday, November 29, 2024. I would now like to turn the conference over to Ms. Demi Abidogun. Please go ahead.
Thank you, Operator, and good morning, everyone. Our speakers on today's call will be myself and Steven Salz, Co-Founder and Chief Executive Officer of Rivalry Corp. 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 operating 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 MD&A dated November 29, 2024, 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 will now turn the call over to Steven Salz. Steven?
Thank you, Demi, and thanks everyone for joining us today. The Q3 was the most decisive period in Rivalry's history. It was marked by a complete product overhaul, major organizational realignments, and a substantial reduction in operating expenses. This work was done to better attune ourselves to an evolving online gambling market where cryptocurrency has become the global payment method of choice and to align our offering with the experiential expectations of the players driving this industry-wide shift. These initiatives were set in motion during the Q2 alongside the announcement of Rivalry Token, now called NUTZ, and I'm proud to say we are now emerging out the other side of this immense undertaking as a leaner company and one better positioned for growth.
To touch briefly on the product overhaul completed just this week, it is in orders of magnitude the largest in Rivalry's history and was completed at an absolute breakneck pace. It included a revamped registration flow, login, sportsbook, new crypto-first cashier, completely redesigned casino offering, and a comprehensive VIP rewards program. This is effectively the entire product rebuilt where 99% of interactions occur and was all done in about 90 days. I would not do the team justice by describing how tirelessly they worked day and night, seven days a week to make this happen. So I'll just say thank you and that this is what it takes to win, and that is our objective.
I will detail these new releases later, but we're confident this evolved product set debuted alongside a more mature digital-first rebrand will accelerate Rivalry's position as a global crypto-native operator and enable us to capture high-value players, and we already have some immediate internal data to share on this. In just the two short months since we began to deploy the initial set of these efforts, meaning the start of October, from the start of October, so about 30 days into the 90-day sprint, our average net revenue per user has hit all-time records, increasing by 51% as compared to the 2024 year-to-date average up until that point and by 70% as compared to the trailing three-year average. Additionally, our native crypto token has developed materially alongside these efforts. It is integrated with our VIP strategy and overall growth plan, allowing us to better scale the crypto gambling category.
To touch on the organizational impacts during the quarter, we reduced our headcount by approximately 50% through two workforce rationalizations, one that occurred at the start of Q3 and one in the final days. On the back of this, we significantly adjusted our performance culture, resulting in a more robust and higher output organization with measurable output climbing over 200%. It is this culture shift that made this product overhaul in record time a reality. And I want to again thank the team for not just their resilience through this period, but also their determination to deliver at a level that far exceeds historic standards at Rivalry.
With the associated cost savings from this organizational realignment and a significantly drawn-down marketing spend associated with our prior strategy both now near fully realized, I'm pleased to say that Rivalry's current run-rate operating expenses are approximately 50% lower as compared to those in today's Q3 2024 report. Additionally, Rivalry's Chief Technology Officer Ryan White and Chief Operating Officer Kevin Wimer have taken a voluntary 100% reduction in their salaries as of August and September, respectively. I have also opted to reduce my salary by 100% as of October and now by 50% as of November. It's important that the leadership team share in the sacrifice we've asked of our team and shareholders in the near term as we complete this top-to-bottom realignment and strategy shift, which we can now build off of.
We are confident that our current run-rate reflects a leaner, more efficient cost base, positioning us well for capability and enabling us to return to growth. Alongside today's Q3 results, we shared Rivalry's native crypto token has continued to deliver positive results, generating CAD 3 million in deferred revenue in Q3. As noted on the Q2 conference call, token sales record as deferred revenue until we officially launch the token and deliver it to the wallets of those who pre-purchased them. Excuse me. The anticipated date for this is early 2025. In the meantime, we expect token sales to continue throughout the remainder of the Q4 and into the Q1 of next year. The revenue driven by our token during this period signals that this product is finding market fit among our target audience and being well received in the broader crypto community.
Beyond the direct revenue contributions, we're seeing encouraging downstream effects among customers engaging with the token, including revenue profiles that are on average 200% higher and retention rates that are 30% above average among crypto wallet-connected users on Rivalry relative to our fiat customers. Lastly, we successfully closed the second tranche of the non-brokered private placement announced earlier this week, totaling CAD 3 million raised. It has been gratifying to get the support of insiders, family, and friends and long-term shareholders as we press ahead into this new chapter of the company. This financing strengthens our balance sheet, underscores insider and long-term investor confidence, and supports our trajectory to profitability while enabling us to resume an offensive growth strategy. Before going any further, I will ask Demi to review our Q3 2024 financial results in greater detail. Now, Demi, over to you.
Thank you, Steven. Betting handle was CAD 79.9 million in the Q3, representing a 9% sequential decrease from Q2 of 2024. As Steven communicated, the significant drawdown in marketing expense associated with our previous strategy throughout the Q3 had a direct impact on betting handle as we worked to reposition the business. Additionally, a portion of the recorded marketing spend in the quarter represented agreement exit costs and was not put toward player acquisition. Adjusted revenue in Q3 of 2024, inclusive of CAD 3 million in deferred revenue for NUTZ, was CAD 6 million. Net revenue was CAD 3 million in Q3 of 2024. The nine-month-ended net revenue was CAD 12.1 million, down 8% from the comparable period in 2023. This is again primarily a result of the reduction in marketing spend and an increasing mix of casino betting handle, which, although more stable, is lower margin than sportsbook.
Looking at our two segments, gaming generated 62% of handle, with sportsbook accounting for 38%. Gaming handle has continued to trend up compared to 60% last quarter and 51% in Q3 of 2023. As a percentage of net revenue in the Q3, casino accounted for 40%, up 14%, and 2% year-over-year, respectively, while sportsbook represented the difference. Rising casino share is attributed to new content, exclusive games, and continued product development. I will now turn to operating expenses. Total operating expenses decreased by CAD 0.7 million, or 8%, compared to Q3 of 2023. However, as Steven noted in his opening remarks, where a meaningful portion of our operational adjustments executed throughout Q3 nearly fully realized, the run-rate operating expenses of the company as of the date of this release are approximately 50% lower than what was reported in this quarter.
Marketing, advertising, and promotion expenses decreased by CAD 0.9 million, or 30%, from the previous year. Net loss of CAD 5.8 million represented a small increase of CAD 0.2 million from Q3 of 2023. Lastly, I will briefly touch on our financial resources. We ended Q3 of 2024 with CAD 2.1 million in cash. Subsequent to quarter end, Rivalry closed a non-brokered private placement for gross proceeds of CAD 3 million, which further supports our balance sheet. With our current cash position, the aforementioned material reduction in operating expenses, and overall cost structure adjustments, we are confident in our liquidity position. I will now turn the call back to Steven.
Thank you, Demi. Last quarter, I spoke to Rivalry's top priorities, and that's where we'll start today. The first is developing our VIP customer base, the second, capturing crypto gambling market share, and the third, profitability, which will be an output of successfully executing the first two initiatives. As detailed in this morning's press release and at the start of this call, we finalized the most substantial product overhaul in Rivalry's history. This effort, spanning product, brand, payment, CRM, and marketing, was intentionally designed to serve these core priorities and position us for scalable growth. To walk through these developments in more detail, first, we've launched a revamped sportsbook product with 40 new titles, improved features, and a streamlined interface. Leveraging highly customizable white-label technology, we both massively improved our offering, preserved Rivalry's unique, entertaining feel, while also significantly reducing internal development resources required to maintain this vertical.
This enabled us to better manage engineering costs and direct resources toward other high ROI areas of the business. Onto our casino. Our product has been completely revamped to improve functionality and accommodate an expanding catalog of content. We also debuted casino races, an interactive way for players to compete against one another and earn rewards based on their wagering activity. This has been driving more action from our largest players in just a few short weeks since its release. Casino has been a consistent and stable revenue source with rising share in early data showing it accounted for two-thirds of betting handle among crypto-native players. Casino will continue to play a vital role in our long-term strategy. Building on our wallet improvements earlier this year, we've integrated a crypto-first cashier system.
This provides faster, more flexible deposit and withdrawal options across multiple digital currencies and strengthens our appeal among crypto-native players globally. Players can now wager with digital currencies, an important offering that deepens the experience for users. To strengthen player retention and drive activity among high-value users, we've launched an expansive VIP program offering cashback, free spins, monthly, weekly, and daily rewards. This asymmetrically rewards larger plays, so Rivalry's most loyal players have more reasons to play every day, driving wallet share among high-value players. We'll be iterating this program at an extremely rapid pace, tweaking and tuning based on observed player interaction and direct dialogue with these players. This customer-centric and highly iterative way of building is central to our DNA and will be an important contributor to sustaining our growing net revenue per player levels.
At the same time, we've also made significant enhancements to our customer relationship management flows, or CRM. These improvements are already helping us convert new users more effectively and reactivate current players. Next, our registration and login journey has been streamlined to reduce friction and expedite user onboarding while remaining compliant. We've also begun rolling out a strategic rebrand across our product and marketing channels to better target crypto gamblers and digital-native players. Brand has played a key role in Rivalry's competitive differentiation, and we feel confident this new direction will resonate with both our existing users as well as the crypto audience. Lastly, I'd like to discuss our project, our crypto project Rivalry Token, now rebranded as NUTZ. NUTZ supports our expansion into the crypto segment, engages high-value players, and creates a new revenue stream for Rivalry.
Once fully launched, which is anticipated in early 2025, NUTZ will function like any other cryptocurrency, deposited into users' digital wallets, priced by the market, and usable both on and off Rivalry's platform. Importantly, NUTZ addresses a fundamental challenge in online gambling, the traditional win-lose dynamic between players and the house. The token acts as a technological solution to create alignment between players and the house. In betting, the challenge is that the experience is primarily a win-lose cycle: deposit, wager, win some, lose some, and repeat. In online gambling, customers' losses are the operator's revenue, and that creates a relationship between the operator and the user that is atypical in consumer products. This explains the loyalty challenge in online gambling and why many players will have accounts on multiple platforms at the same time.
Creating alignment between player and house to find a win-win approach is a sizable opportunity here, and that's what we aspire to solve with NUTZ, or certainly move the needle on. This problem set in online gambling and solving it is one we've been thinking about deeply since founding the company, and solutions that looked and sounded in many ways like NUTZ were ones that we had ideated and proposed back in 2017 when we originally were pulling together our license application in the Isle of Man. It was too early then, with the technology not developed enough nor legal frameworks in place, so it's incredibly exciting to be able to build upon our early philosophy and now execute it with this token project. All to say, this was not an overnight concept for us.
For the last six months, customers have been earning NUTZ through on-site activities like sports betting and casino. Tokens are earned on every wager, win or lose, and customers can amplify their earnings through daily missions and campaigns we're running that are designed to encourage engagement. Once fully launched, these tokens can be used to bet on Rivalry, claim rewards, and much more. As a cornerstone of our VIP strategy, NUTZ enables us to deliver a more customer-centric experience, foster loyalty, and deepen site engagement. Looking ahead, we will continue to enhance the token's utility, launch new products to attract more users, and drive connected wallets and additional revenue. With that said, at this point, we'll open up the call for Q&A, so Operator, can you please provide the instructions?
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. Should you wish to cancel your request, please press Star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your question comes from the line of Jack Vander Aarde from Maxim Group. Please go ahead.
Okay, great. Good morning, guys. Thanks for the update. And good work on plenty of things going on, good work on a lot of the corporate overhaul and the rebrand. There's quite an effort. And congrats on the recent capital raise as well. Steven, with all these moving parts going on, I know you've kind of walked away from the guidance for now, but do you have a sense of just, can you just touch on kind of your cash runway as well as the current OpEx levels, which you've reduced significantly? How much runway do you guys think you have right now, and is there a chance you reestablish a profitability guide next year once the dust kind of settles?
Yeah, I think if you look at the PR, our language there is kind of the way we feel about it. Whereas you can imagine looking at this release, it's like a 3,000-word release. We've done a lot the last, excuse me, three to four months and significantly overhauled effectively every element of the company. So I think in my quote in that release, I noted we still, near-term profitability, I think just triangulating it with the same precision is not something we want to do right now. In terms of the runway and the ability to get there, we obviously feel confident we will.
I mean, if you look at, let's say, just the simple math of current run rate operating expenses being 50% down from what people are seeing in our financials, even if you assume, let's say, stable revenue off these levels, no growth, you can see a pretty clear path to being there quite soon, which is why we still kind of note a near-term profitability. So yeah, I think early next year we would maybe look to reestablish it, but I also expect that over that period, we're looking to try to hit profitability as well. So yeah, I think that the work we've done on operating expenses, the financing, which helps to bolster the balance sheet a little bit.
And again, you just pieced together the OpEx changes, the overall revenue picture that we have right now, and yeah, it doesn't take much to work back to the company-generating cash flow. So yeah, I think we feel comfortable with our liquidity position. We feel comfortable with our ability to get there with where we're sitting today. And then with kind of the various catalysts coming up related to token, additional revenue that comes in there, potentially releasing that early next year, these are all things that support our ability to cross that threshold, which is still our number one priority target right now.
Okay. Got it. I appreciate the color there. And it's good to see, I think you actually had kind of an acceleration, if you call it that, from deferred revenue kind of run rate coming in the CAD 3 million. I think last quarter, you were talking about CAD 1.7 million in the first two months, so CAD 1.3 million in the third month, which is great to see. When you touched on the users that you were talking about, 50% were reactivated users, and I think 15% or so were new to Rivalry users. I think that was last quarter. Do you have an update on that kind of stat more recently and kind of, I guess, in the second half of this year? Has that kind of changed? Or just curious about the user base and customer activation.
Yeah. I mean, yeah, not that specific one. I think we're seeing a pretty significant uptake of people that are trying to connect their wallets to farm NUTZ and therefore eventually earn instant release of the token. As mentioned, they're much larger players. They represent a decent percentage of our overall, let's say, high-value player user base. In terms of which amount is reactivated versus not, I don't honestly have that stat right now. I think the thing that we were most excited to provide that is definitely new is the combination of everything that's been going on with the token specifically. And again, that specific player base, which is an increasing percentage of the overall player base of Rivalry, the overall efforts to bring in more of a crypto-native crowd, meaning people that are depositing crypto.
And then the early, you're talking like the first third of the deployments of new product releases that went live in October until today. The aggregate company-wide average net revenue per user is up significantly. That figure is basically the last 60 days as compared to the period of 2024 up to that point and the trailing three-year period. That's effectively our ARPU, right? I mean, it is effectively our ARPU. So yeah, I think that to us is the best signal right now that the things we're doing are leading us in the direction that we wanted to, where if having average net revenue, I'm sure you've covered lots of companies, having an ARPU increase by like 50% and hit historical levels is a pretty big achievement. And then the same thing when you compare to a trailing three-year basis.
So I think this is more where we're trying to push the dialogue because that's really what counts. Our ability to prove that we are engaging VIP players better, which just means people that are depositing more and playing more, our ability to build product that is centered around high-value players, specifically a crypto-native audience, that will manifest and represent itself in the aggregate, call it ARPU of the company going up. So yeah, we've seen our internal kind of BI system, it's like a hockey stick-looking chart, basically, right? So to a degree, we've never had in our history by far, and obviously has kind of hit these historical levels on those figures. So what that means is we need far few players to generate the revenue that we're looking for.
And then obviously, when you combine that with an operating expense base that is down significantly, this is just going to create way more leverage and torque for us. We need way fewer players because we're generating way more revenue per player now, and we're seeing that continue to go up. And then the overall, call it OpEx base, that needs to be crossed to deliver profitability is half of what it was even in the Q3, let alone if you compare it to, let's say, Q1 this year or sometime last year, it's probably down 60%-65%, right? So yeah, these things are all playing to our advantage right now, and we're seeing exactly the KPIs that we would want to see from the strategy shift that we started four or five, six months ago.
Okay. Great. And then maybe just kind of a touch on it. It's kind of the last question, just on the handle trends, sportsbook, gaming. Gaming's kind of stabilized, it looks like, for the most part. Sportsbook's also somewhat stabilizing, it looks like, as well. Do you have an idea of just, can you just touch on those two handle dynamics and where you see them kind of trending? And is the Q3 seasonality-wise, just all these elements just to help give a sense of the idea?
Yeah. We expect.
Where it's going?
Yeah. Both will grow. That's kind of what we're moving back to now that we've completely, yeah, reset the entire foundation of the company, basically, in the last four months. But as a percentage of the total, my expectation is casino will continue to grow as a percentage of the total. I think what we've seen, and we put that in the script a little bit, is crypto depositing players have a much higher propensity to be casino players than sports bettors currently. This is kind of a trend we see elsewhere, to be honest. It's not just Rivalry. If you look at other operators, it would be similar. So I think we obviously want the entire total pie to grow fully to the point it will.
Then, as a percentage of that overall pie, our expectation is, seasonality or not, that casino will continue to be a majority share and probably a rising majority share. That trend, which is what we've been seeing the last, let's say, two to three quarters, is what we expect we'll continue to see going forward right now.
Okay. Great. I think that's it for me. I appreciate the update. Thank you.
All right. Thanks, [Aarde].
Thank you. There are no further questions at this time. I will now hand the call back to Mr. Salz for any closing remarks.
Thanks, Operator. And thank you, everyone, for joining us for the Q3 call. And as always, shoot us an email, and happy to continue the discussion offline. Thanks, everyone.
Thank you. And that concludes our conference for today. Thank you all for participating. You may now disconnect.