Rush Street Interactive, Inc. Q2 FY2025 earnings call

• Delivered record quarter with new highs in revenue, profitability, EBITDA margins, and active player counts, marking ninth consecutive quarter of improving revenue and adjusted EBITDA.
• Adjusted EBITDA grew 88% YoY, driven by 22% revenue growth YoY. Online casino grew 25%, online sports betting grew 15% YoY.
• North America MAUs in markets with online casino grew over 30% in Q2; Latin America MAUs grew over 40% YoY.
• Highlighted market performances: Michigan grew 42% YoY, West Virginia 47% YoY, Delaware 74% YoY, Ontario 25% YoY, Colombia GGR up over 70% YoY, Mexico grew over 125% YoY and 40% sequentially.
• Expansion plans in Alberta, launching multistate poker with shared player pooling, partnerships with Phil Hellmuth and Phil Galfond.

Online casino revenue grew 25% during the quarter, while online sports betting grew 15% compared to the same period last year. In North America, MAUs in markets including online casino grew by over 30% in the second quarter. Even when excluding Delaware, growth in other iCasino markets was in the high 20% range. In Latin America, MAU growth exceeded 40% year-over-year. Online casino revenue contribution: 25% growth YoY; online sports betting revenue contribution: 15% growth YoY. North America MAUs contribution: over 30% growth; Latin America MAUs contribution: over 40% growth YoY.

• Raised full year 2025 revenue guidance to between $1.05 billion and $1.1 billion, representing a 16% year-over-year increase.
• Anticipates adjusted EBITDA for full year to be between $133 million and $147 million, with a midpoint of $140 million, up 51% year-over-year.
• Guidance includes potential outcomes from temporary VAT tax in Colombia assumed to last through end of year, and includes only markets live as of today.

• Temporary VAT tax in Colombia as a headwind to revenue and profitability.
• Uncertainty regarding potential extension or repeal of the VAT tax in Colombia.
• Impact of sports outcomes on revenue, as seen in Q2 with sports outcomes positively impacting revenue but potential for variation.
• Competition in various markets affecting growth and margins.

Q: Maybe just to start, I would like to just make sure we understand what's going into the guide in terms of taxes. So given the higher state taxes in a variety of states in the second half, what are you guys assuming? And then any specific comments on what your strategy is going to be in Illinois?

A: In terms of tax changes in Illinois and New Jersey, full impacts are included in guidance. VAT tax in Colombia is assumed to be in place through end of year. On Illinois, moved minimum bet up to $1, remaining flexible towards NFL season Q: Understood. That's really helpful. And then I just wanted to move over to LatAm and the growth rates that you described in Mexico were quite impressive. So just wanted to maybe understand where you see the glide path is to revenue and the opportunity to continue to scale just given the population GDP per capita per there relative to Colombia.

A: Expect Mexico to be one of largest markets, ahead of Colombia in revenues post-launch. Unique user experience resonates well, optimistic about significant market potential Q: A follow-up to a question we often ask on these calls, and that's the use of cash. The share repurchases have been somewhat minimal year-to-date. So is there any change to the thought around using your capital to invest back into the business? Or are there any external opportunities through M&A or just new markets you would look to do just given the trajectory of the free cash flow?

A: Continue to be opportunistic with share repurchases. Biggest opportunity is investing in new markets, particularly iCasino-led markets, to ensure dry powder is available for growth Q: Going back to Colombia, have you noted -- we've seen -- you told us about the growth rate, pretty incredible growth, but have you seen any change in the customer? And I guess what I'm trying to ask here is as we exit the VAT tax at the end of the year into '26, would you expect the market to look any different? Or is it kind of business as usual from what you saw back in '24?

A: Experience and customer interface remain same, expect revenue uplift next year with higher GGR conversion to NGR and revenue, and disproportionate uplift to margins and free cash flow as VAT tax goes away Q: Really nice quarter. I want to stay on the last point you just said, Richard, just on Colombia. But overall, remarkable growth and margin expansion despite those headwinds from the VAT tax. So as it relates to Colombia, just when that goes away next year, is it as simple as assuming that revenue will see an immediate uplift, you'll have higher GGR conversion to NGR and revenue, and then you'll have a disproportionate uplift to margins and free cash flow because there really shouldn't be much incremental costs attached to that incremental revenue?

A: Generally right, history suggests continued player count growth, confident in growing player base, and VAT tax is a big headwind currently, excited for when it's gone Q: Two, if I may. Just going to the growth in Ontario, I think you said it was 25%, highest in a couple of years. Is that being driven more by you're taking some share from gray market operators or anything you can explain there? And then just on the guidance, kind of implies the back half EBITDA is in line with the first half. And if I look historically, every year, your EBITDA grows incrementally each quarter. So can you just give us a little more update on how we should be thinking about the back half and potential investments there?

A: Focus on Ontario due to large market size and appeal of sports/casino. Marketing spend expected to go up in Q3 and Q4, impacting EBITDA cadence, with leverage expected but more marketing spend in later quarters Q: Congrats on a very strong quarter. I really would like your perspective on the prediction markets. It comes up consistently, not just in our conversations with investors and with some of peer operators, et cetera. Not a will you or won't you question, but what do you make of all this?

A: Monitoring prediction markets closely, as a casino-first company, prediction markets could accelerate iCasino legalization, which is a protected category with revenue upside for states Q: Nice quarter. I wanted to ask about -- maybe let's start with live dealer, how you're thinking about that market going forward? It's grown a little bit in a few of the states that where it's permitted, still well below what we're seeing in other markets. But wondering if you could kind of touch on how you're thinking about this business short and long term.

A: Live dealer has room for growth, focusing on high variety, exclusive content/tables, improving user experience by aggregating games, and offering robust offerings to core casino customers Q: First, just a follow-up on the guidance. I think the second half implied revenue growth is about 10%, 12%, given where you fall in the range, which compares with the first half growing around 20%. What's driving that deceleration? Is that -- are you just being conservative with Colombia? Or is it lapping very strong growth last year? Or anything kind of to kind of give more detail on what's driving that?

A: Deceleration due to lapping Delaware launch, temporary VAT tax in Colombia uncertainty, tougher comps in Colombia due to Copa America last year, and potential slowing as markets mature Q: I wanted to ask you on Colombia, Latin America in general in terms of your segment there. And just kind of revisit your approach to Colombia. Obviously, you had significant growth in GGR in the quarter and flat NGR. That was a similar case in the first quarter. I realize you're essentially paying the tax. I would imagine some of that user growth that you're generating there is because you're paying the tax. Can you just kind of revisit that strategy and as best you can, maybe explain it to us about what competitors are doing and what could shake out with that market stabilizing at some point later this year?

A: All market leaders deploy similar bonusing strategies. Focus on product and experience to grow customer base, using unique payment methods and operational strategies to optimize performance and minimize VAT tax impact. Tougher comps in Q3 due to Copa America last year's player growth, but Q4 expected to be biggest revenue quarter