Rush Street Interactive reports positive EBITDA for second successive quarter

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Rush Street Interactive CEO Richard Schwarz has heaped praise on the company’s online casino-centric approach to operations after it recorded a second successive quarter of positive EBITDA contribution. 

Publishing its Q3 financial results, RSI – which runs the BetRivers and PlaySugarHouse brands – posted revenue of $169.9m up 15% year-over-year. Breaking it down geographically, $151m was derived from US and Canadian operations, and $19m from Latin American operations.

The firm has also stated that it is a top five operator in all online casino markets where it operates in the US and Canada Pennsylvania, West Virginia, Michigan, New Jersey and Ontario.

RSI did make a net loss during Q3 coming in at a loss of $13.4m, however, losses have nearly halved from the $22.7m loss recorded in Q3 of 2022.

Additionally, adjusted EBITDA profitability was achieved for the second consecutive quarter, reporting $4.1m in comparison to a loss of $12.5m the previous year.

Addressing investors, Schwarz explained: “Our goal from the beginning has been to develop an experience that retains customers. In today’s landscape, we are unique, a digital-first operator with an iCasino customer-centric approach. We’ve consistently maintained that as the industry grows and matures. 

“Consumers will naturally gravitate toward the best products. As a playing field levels with a tide of marketing and aggressive bonus in dollars slowly washing away, that is what we are seeing.”

Breaking down the performance, RSI reported that across its online casino markets, it is witnessing market share increases despite a decline in marketing spend. Advertising and promotions expenses during the quarter came in at $34.1m compared to $44.7m in Q322.

The firm is reporting that its market share in several states is reaching peaks not seen for several years which is coming despite that drop in marketing spend. Schwarz puts that down to having a strong product that lends itself to consumers who are “being more discerning and deciding where they want to play based on user experience”. 

He explained: “For those of you that track the publicly available state casino data, the trends are evident. While we focus on profitable growth as a priority of our market share, it’s nice despite our marketing spend decreases. We’ve continued to grow market share in a meaningful number of US markets. Our quarterly online casino share in the states of New Jersey and Michigan are higher than any time over the past year.”

While online casino is RSI’s bread and butter, Schwarz shared more exciting news with investors: the firm enjoyed its first-ever profitable sports betting quarter. 

The CEO attributed this to its “ability to innovate”, namely through going live with its Prop Central functionality, with initial sportsbook results leading to material increases in higher-margin player prop bets.

“Now there is a central hub for all player props across all major sports and it is presented in an easy-to-use and uncluttered format. The results have been very positive thus far. With a year-over-year increase in propped handle of 87%. That is not all that we’ve added to the sportsbook. We continue to leverage the success of our bespoke squares game.

“The year-over-year growth in this quarter was the highest level we’ve achieved since introducing the Bet Rivers brand in New Jersey last summer. And our US online sports bit-only markets, we are continuing to see double-digit year-over-year growth and market share growth in many of those states, despite coming up against more difficult comparisons in the prior year and reduced marketing by RSI in those markets.”

A key operational highlight of Q3 was being selected by the Delaware Lottery to be the exclusive provider of online gaming. Set to launch by the year’s end, the partnership sees RSI go into a market that currently earns $13m in GGR, 80% of which comes from online slots. 

This, the firm asserted, plays straight into its hands and it believes that the exclusive lottery contract will help it to grow the market and eventually improve its bottom line. 

Asked by analysts how this will materially impact the shape of the business moving forward, Kyle Sauers, CFO of Rush Street, stated that it will take time to be profitable given that marketing spend will be required, but that it will generate long-term gains. 

Sauers noted: “The market is pretty small right now. But over time, we think there’s a pretty nice opportunity to expand. It’s not going to happen overnight.

“I would not think about it as some big headwind in 2024 like most markets, it takes a little while to get up and running. There’s some costs associated with that. But like other North American casino markets, that we’ve demonstrated. Delaware, it should get profitable pretty quickly.”

After a successful quarter of trading, RSI has increased the midpoint of its 2023 revenue guidance to $675m with its full guidance being $665m and $685m. The midpoint would mark a 14% uptick YoY in comparison to 2022’s revenues of $592m.