Rush Street Interactive, Inc. Q1 FY2025 earnings call

• Revenue of $262 million was achieved, marking a 21% year-over-year increase, driven by 25% growth in online casino and 11% growth in online sports betting.
• North American MAU grew by 17% year-over-year, and Latin America MAU grew by 61% year-over-year.
• Gross profit margins improved by 125 basis points to 34.9% in the first quarter.
• In Colombia, GGR increased by 55% in local currency despite the temporary implementation of a 19% value-added tax on player deposits, with the company absorbing the tax through higher bonusing.
• The iGaming Alberta Act advanced to the committee stage, with expectations of operating in Alberta next year.
• Demonstrated strong performance in high-value markets such as Michigan, Delaware, and New Jersey, with Michigan seeing 40% revenue growth, Delaware exceeding 80% revenue growth, and New Jersey growing by 27%.

First quarter revenue was $262 million, up 21% year-over-year. Online casino experienced a 25% year-over-year growth, while online sports betting saw a 11% year-over-year increase. North American MAU grew by 17% year-over-year, with ARPMAU in North America reaching $368, up 3% year-over-year. In Latin America, MAUs surged 61% year-over-year to 354,000, with ARPMAU in the region at $36. Gross profit margins improved by 125 basis points to 34.9% in the first quarter.

Reiterated full-year revenue guidance ranging from $1.010 billion to $1.80 billion (with a midpoint of $1.45 billion), representing a 13% year-over-year increase. For adjusted EBITDA, the guidance is between $115 million and $135 million (midpoint $125 million), up 35% year-over-year. The guidance accounts for potential outcomes from Colombia's tax situation, with the possibility of significant upside to revenue and EBITDA if the tax is removed prior to year-end.

• Uncertainty regarding Colombia's tax situation and court rulings that could impact bonusing strategies.
• Competitive dynamics in various markets that may affect market share and net revenue.
• Economic macro factors that could potentially influence consumer behavior and spending on iGaming products.

Q: Bernie McTernan from Needham & Company inquired about Colombia's investments, competition, and market share.

A: Richard Schwartz stated that the company is bonusing at higher rates like other operators in the market, and is achieving record performance in GGR and volume, feeling confident in retaining or growing share despite not being able to directly disclose market share.

Q: Jordan Bender from Citizens asked about the impact of Colombia on net revenue and Pennsylvania's multistate agreement.

A: Kyle Sauers responded that the company is adjusting to the Colombian tax situation, reducing marketing spend in response, and Pennsylvania's poker platform has been a successful debut, serving as a cross-sell to casino and sports.

Q: Jed Kelly from Oppenheimer asked about marketing leverage and guidance.

A: Richard Schwartz discussed the importance of unique user experiences in achieving marketing leverage, while Kyle Sauers mentioned factors like lapping Delaware, the impact of Colombia's tax on guidance, and being mindful of consumer behavior changes.

Q: David Katz from Jefferies asked about prediction markets.

A: Richard Schwartz said the company is focused on understanding the prediction market opportunity and would consider participation if licensed operators are able to do so in a legal market.

Q: Chad Beynon from Macquarie asked about international markets and OSB growth.

A: Richard Schwartz talked about Mexico's strong growth, Peru's optimization of the user experience, and OSB hold rates being impacted by events like the Eagles' Super Bowl win and March Madness.

Q: Joe Stauff from Susquehanna asked about North America MAU concentration and Pennsylvania's growth.

A: Kyle Sauers said Delaware made up mid-single digits of the 17% North American MAU growth, and Pennsylvania had low single-digit growth, with growth coming from higher-margin markets.

Q: Mike Hickey from Benchmark Company asked about Colombia's tax impact on EBITDA and cross-sell.

A: Kyle Sauers discussed the GGR and revenue impact from Colombia, and Richard Schwartz talked about cross-selling strategies between iGaming, sports betting, and poker.