Rush Street Interactive (RSI) has reported ‘lower-than-normal’ hold levels from its icasino offering in its third quarter financial report.
As a result, the operator’s adjusted EBITDA has fallen by 2.5% year-over-year to $12.5m, but this was an improvement on the previous quarter’s $18.6m. Meanwhile, group revenue has improved by 20% YoY to $148m.
CEO Richard Schwartz noted at the top of the operator’s earnings call that its online casino operations had seen a “lower-than-normal” hold during Q3, which had a significant negative impact on its overall revenue for the period.
Foreign exchange headwinds also impacted the operator’s revenue in Colombia and Canada.
Schwartz commented: “First, in online casino, our hold rate was lower than normal and as a result, negatively impacted revenue during the quarter by an estimated $4m. Second, given the macro environment, we experienced foreign exchange headwinds that impacted revenue in both Colombia and Canada.
“We estimate foreign currency movements negatively impacted our revenue by approximately $2m during the quarter. Absent these two headwinds, our revenue would have been within the range expected.”
The CEO also highlighted that Rush Street remains profitable in the markets of New Jersey, Pennsylvania, Michigan, Illinois, West Virginia, and Colombia.
The operator has also made “significant progress” in its nine sportsbook-only markets, reporting an aggregated loss from these markets of less than $5m, representing “less than half” of what it lost in those same jurisdictions during Q2.
Schwartz added that these sportsbook-only markets are benefiting from the “lessening impact of new market launch costs, growing revenues as markets mature, and lower marketing costs as a percentage of revenue”.
As a result, RSI has revised its revenue guidance for the year to $580m to $600m, which Schwartz says reflects “the impact of a third quarter’s lower-than-normal icasino hold, foreign exchange headwinds from q3 and anticipated for q4, and the impact of our disciplined marketing spend in the third quarter”.
Rush Street Q3 Financials
For Q3, RSI has reported revenues of $148m, an increase of 20% YoY (Q3 2021: $122.9m), but affected by the previously mentioned unusual icasino hold and the foreign exchange headwinds from Colombia and Canada.
Net loss for the period was $22.7m (2021: $18.9m), while adjusted EBITDA was a loss of $12.5m (2021: $12.2m), and adjusted advertising and promotions expense was $44.7m, a 2% decline compared to the same period the previous year (2021: $45.4m).
Rush Street’s real-money monthly active users (MAUs) across the US and Canada did grow by 31% YoY to 130,000, accompanied by a 6% improvement in average revenue per MAU (ARPMAU), which stood at $345.
As of September 30, 2022, unrestricted cash and cash equivalents on the balance sheet were $195m with no debt outstanding.
Schwartz noted: “We posted a solid third quarter, as our efficient approach to marketing and robust platform continue to perform well.
“Despite a lower than normal online casino hold rate and currency headwinds during the quarter, which we believe collectively impacted our quarterly revenue by an estimated $6m, we generated record revenues for the fourteenth straight quarter and progressed towards our profitability goals and our target of being adjusted EBITDA positive for the second half of 2023.”
“In terms of activity, we continue to see very strong volumes in markets where we operate both online casino and sports betting, as we are able to execute on the enhanced profitability offered by the online casino vertical in these markets.
“Internationally, we are seeing strong results from both Colombia and Ontario and we are excited to begin increasing marketing efforts in Mexico. We remain focused on building a strong foundation in our new markets that will provide stable, long-term growth opportunities while keeping an eye on future profitability.”
Q3 activity
During the quarter, RSI expanded its partnership with LaLiga to be the league’s exclusive sportsbook partner in South America, it rebranded its New Jersey online casino and sportsbook to BetRivers for “stronger branding and marketing efficiences”, and it launched in-person sports betting in Maryland at the BetRivers Sportsbook at Bingo World.
RSI also went live in Mexico with its online sportsbook and casino in June in conjunction with its partner Grupo Multimedios. Schwartz says the operator is taking a “very deliberate and measured approach” in the market, with a focus on “building a strong foundation that will provide stable long-term growth and profitability”.
However, the CEO did add that as they continue to grow in Mexico by building brand awareness and further localizing its platform and user experience, the operator expects a “more significant contribution” from the region by the end of 2023.
The operator also grew its ambassador relationships and betting content production capabilities with the additions of sports media personalities Mike Missanelli in Philadelphia and Bob McCown in Toronto.
RSI also has plans to go live with online sports betting in Maryland and Ohio in the upcoming months.
2022 Revenue Guidance
As previously mentioned, RSI has updated its revenue guidance for the full year ending December 31, 2022, as it now expects revenue to be between $580m and $600m. At the midpoint of the range, Q4 revenue represents 25% YoY growth.
