Rush Street Interactive highlights growth, predicts positive returns

March 2, 2023 10:36 AM
Photo: Rush Street Interactive
  • David McKee, CDC Gaming Reports
March 2, 2023 10:36 AM
  • David McKee, CDC Gaming Reports
  • Colombia
  • Illinois
  • Mexico
  • New Jersey
  • Ontario
  • Pennsylvania

“Last year was a terrific year” for Rush Street Interactive, according to CEO Richard Schwartz, who said his company made “great strides toward sustainability and profitability.” In 2022, the company launched operations in two international jurisdictions (Ontario and Mexico) and three new U.S. states. He added that in the latter, igaming legalization was being discussed more than previously.

Story continues below

Despite a $30 million net loss for the fourth quarter (and $134 million in red ink for the full calendar year), Rush Street leadership emphasized revenue growth, which was 27 percent in the final frame to reach $165.5 million. For the full year, RSI grossed $592 million, a 21 percent improvement, with Schwartz forecasting $630 million to $700 million in revenue this year. The company recorded negative return on investment (ROI) of $17.3 million in the fourth quarter, an improvement on 2021, and expects that number to turn positive beginning in July.

Schwartz also noted that RSI has $180 million in cash on hand and no debt, “more than fully funded to achieve sustained profitability … at sensible investment levels.” He defined the RSI formula as “solid revenue growth, plus disciplined marketing spend.” For instance, when launching in Maryland late last year and in Ohio at the start of this year, RSI cut back on takeoff expenses compared to what it invested in other states, thereby expecting positive financial results to manifest sooner.

One exception is New Jersey, where expenses are increasing around a rebranding of BetRivers. However, containment of marketing spending was a theme to which Schwartz and CFO Kyle Sauers returned again and again. “We will remain efficient in any new or existing markets we will enter,” said Schwartz, with Sauers adding that $80 million of last year’s $92 million in negative ROI was due to new-market launches.

While marketing was up sequentially, Sauers predicted it would drop this year, describing player-acquisition costs as “rational.” Sponsorships, he added, were “a hot topic. We’ve tended not to make large or long-term investments in those kind of relationships.” RSI has only $20 million in sponsorships going forward, enabling the company “to be nimble.”

Continued Sauers, “We’ve got a great marketing team here. It’s probably [along with sponsorships] 10 to 15 percent of our total costs, so we’ve got a lot of flexibility in that spend.” He thinks RSI has “achieved a lot” with “modest” outlays, $218 million throughout 2022.

Two-thirds of RSI’s 2022 revenue came from just New Jersey, Illinois, and Pennsylvania. “The markets where we didn’t enter with a casino brand or a database we could leverage are doing  nicely,” Sauers reported.

Asked about the prospect of Pennsylvania opening to additional icasino and sports-betting operators, Schwartz said, “We’ve faced consistent competition and we’ve done a really nice job of maintaining share.” He expects “the intensity of Pennsylvania will continue to be there” and will stress quality of product, as that’s the only competitive dynamic under his control.

“The industry is aligned in a way I haven’t seen before,” he said of igaming’s political prospects. Lawmakers, he continued, are realizing its monetary effectives; “conversations are now turning into drafts” and some of those drafts are turning into bills. He cited igaming discussions in the capitols of New York, Maryland, Illinois, Indiana, and New Hampshire, but cautioned that it won’t be an “overnight” success story.

Pressed on how long it would take to monetize igaming, Sauers explained that it would depend on the state, its tax rate, and the competitive landscape, although there’s “a huge advantage” to already being present with online sports betting (OSB) in some states. Michigan and West Virginia, he continued, were profitable for everyone in icasinos within the first year and that timeline might be even shorter in OSB-enabled states, such as New York. Internet casinos, he reiterated, gave RSI three to five times as much market share as sports betting.

Speaking of sports, the World Cup was very good for RSI in Latin America. “The impact for our business was much stronger [than in the U.S.], particularly in Colombia,” said Schwartz. “The quality of the customer was strong. It was a very positive experience.”

RSI’s Colombian business grew 59 percent when measured in dollars (89 percent in pesos), and the company is building new offices in Bogota and Medellin.

As for Mexico, “We remain very deliberate and measured in our ramp,” said Schwarz, concentrating on building brand awareness. Sauers added for context that Colombian business had gone from $4 million to $12 million in the first two years of operation and he expected Mexico to be stronger still.