In its second-quarter earnings statement, Rush Street Interactive announced revenue of $165.1 million, a 15 percent increase over the same period of 2022. The company also narrowed its net loss to $16.7 million from $28.3 million.
But the statistic on which Wall Street analysts praised RSI the most was return on investment (ROI), which swung from a negative $18.6 million in the second quarter of 2022 to $1.2 million this past quarter.
CEO Richard Schwarz said the company was “executing very well” and ahead of schedule for generating positive ROI. “We’re really pleased with our overall performance,” which exceeded Wall Street consensus. “We’ve solidified our position as a top-five operator of online gaming and sports betting in the United States.”
“We’re in excellent position to continue the suggested EBITDA profitability,” added CFO Kyle Sauers. He pointed out that in sports-betting-only markets, RSI lost just $1 million (most of that attributable to New York state), “creating minimal drag.” Hold percentages were “meaningful” in sports betting and in line with expectations for igaming.
Some of this was attributable to a player mix shifting toward higher-end higher-value players even as “we decreased our spend on a year-over-year and quarter-over-quarter basis,” Sauers reported.
RSI has $128 million cash on hand and no debt, as Sauers guided Wall Street analysts toward year-end revenue of $650 million to $690 million.
Even so, Sauers hedged a bit on full-year profitability. “We haven’t offered a magnitude of profitability for the back half” of the year. He thinks the third quarter “could well be profitable,” but that the fourth quarter could be softer or flat.
Schwartz described the sports-betting strategy as one of focusing on high-value long-term players who could deliver “quality.” He added, “We continue to add features to augment our parlay and props bets,” noting that baseball parlay wagers were up 60 percent this year. Also, a “squares game” featured during the NBA playoffs was successful in generating parlay action: “This is validation of the behavioral change we want in players.”
He continued, “We put a lot of effort into surfacing the right type of bets for the right type of players. We’re going to be highlighting a beautiful new feature for NFL season.” Called “Prop Central,” it aggregates all football players into one site, with the aim of making prop betting easier.
One area of heavy discussion was the potential for expansion of igaming, both domestically and abroad. Schwartz said RSI was exploring “positive activity on the legislative front,” including in New York, Indiana, and Illinois, “where progress was made this past year,” although none of those states got the igaming ball across the goal line last session. If those states legalized igaming, it would expand the current market from 34 million Americans to more than 94 million.
Schwartz’s strongest hope may be for Maryland, where igaming is currently being studied by the State Lottery & Gaming Commission. The RSI CEO quoted one prominent solon to the effect that igaming will be legalized in the early days of the next legislature.
Asked about Ohio’s recent doubling of the tax on sports betting providers, Schwartz mused that it probably reflected a disconnect between the tax revenues promised to politicians and the lesser reality.
Up in Canada, other provinces — most notably Alberta, but also British Columbia and Quebec — may follow Ontario’s lead into internet casinos and online sports betting. “We continue to remain confident over the long term,” said Schwartz.
Internationally, RSI saw 30 percent revenue growth in Colombia, while expecting to ramp up operations in Mexico in the remaining half of the year. While not discounting populous Brazil, which is mulling igaming and sports betting, Schwartz emphasized Peru, which has just legalized icasinos, as well as Chile and Argentina, which were “making progress.” He said RSI would be keeping a watch on all of those countries. “We think we have a head start on the most sophisticated operators in the industry.”
Concluded the CEO, “We’re well equipped to continue executing our strategy.”
