Earnings call transcript: Rush Street Interactive posts Q4 2024 earnings beat

Rush Street Interactive Inc. (RSI) reported its fourth-quarter 2024 earnings, surpassing Wall Street expectations with an earnings per share (EPS) of $0.07 against the forecasted $0.05. The company also reported a revenue of $254.2 million, exceeding the anticipated $243.83 million. Following the earnings announcement, RSI’s stock surged 8.65% in after-hours trading, closing at $14.45. According to InvestingPro analysis, RSI appears undervalued based on its Fair Value calculation, with analysts maintaining a strong buy consensus and setting a high target of $17. The stock has demonstrated remarkable momentum, delivering a 134% return over the past year.

Key Takeaways

• RSI’s Q4 2024 revenue rose by 31% year-over-year, reaching $254.2 million.
• The company reported a significant increase in adjusted EBITDA, up 2.5 times from the previous year.
• RSI’s stock price increased by 8.65% in after-hours trading following the earnings beat.
• Strong growth was observed in both iCasino and sports betting sectors.
• The company ended the year with $229 million in unrestricted cash and no debt.

Company Performance

Rush Street Interactive demonstrated robust performance in Q4 2024, with revenue climbing 31% year-over-year. The company has shown resilience and growth, capitalizing on the expanding iCasino and sports betting markets. RSI’s focus on proprietary technology and innovative product features has strengthened its competitive position, particularly in North America and LATAM, where it reported substantial user growth. InvestingPro data reveals several positive indicators, including strong sales growth forecasts and upward earnings revisions by analysts. With a healthy current ratio of 1.71 and more cash than debt on its balance sheet, RSI maintains a solid financial foundation for continued expansion.

Financial Highlights

• Q4 2024 Revenue: $254.2 million, up 31% year-over-year.
• Full Year 2024 Revenue: $924.1 million, up 34% year-over-year.
• Q4 Adjusted EBITDA: $30.6 million, a 2.5x increase from the previous year.
• Full Year Adjusted EBITDA: $92.5 million, an 11x increase from the previous year.
• Gross profit margin increased to 36.5% in Q4, 35% for the full year.

Earnings vs. Forecast

Rush Street Interactive reported an EPS of $0.07 for Q4 2024, surpassing the forecasted $0.05 by 40%. The revenue of $254.2 million also exceeded expectations, marking a positive surprise of approximately 4.3%. This earnings beat highlights RSI’s strong operational execution and market positioning.

Market Reaction

Following the earnings announcement, RSI’s stock experienced a notable increase, rising 8.65% in after-hours trading to $14.45. This surge reflects investor optimism driven by the company’s better-than-expected financial results and positive outlook. The stock’s current price is approaching its 52-week high of $16.78, indicating strong market confidence. InvestingPro notes that RSI’s stock movements are quite volatile, with a beta of 1.76. Despite recent volatility, the stock has shown impressive momentum with a 39.5% gain over the past six months. For deeper insights into RSI’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Looking ahead, RSI has provided a revenue guidance range of $1,010 million to $1,080 million for 2025, with a midpoint growth expectation of 13%. The company also forecasts an adjusted EBITDA of $115 million to $135 million, representing a midpoint growth of 35%. RSI plans to continue its focus on expanding iCasino markets and enhancing its proprietary technology platform.

Executive Commentary

CEO Richard Schwartz stated, "We not only set records in revenue, profitability, cash flow, margins, user accounts and many other key KPIs." He emphasized the company’s strategic focus on creating high-quality user experiences, which has contributed to its successful performance. Schwartz also noted, "We are actively assessing and considering options all the time," highlighting RSI’s openness to potential M&A opportunities.

Risks and Challenges

• Potential impact from Colombian tax changes could affect profitability.
• Market saturation in existing states may limit growth opportunities.
• Regulatory changes in the online gaming industry could pose challenges.
• Economic uncertainties may impact consumer spending on gaming activities.

Q&A

During the earnings call, analysts inquired about the implications of Colombian tax changes, the challenges in the sweepstakes market, and the potential for entering new state markets. The company addressed these concerns by emphasizing its strategic initiatives and focus on operational efficiency to mitigate potential risks.

Full transcript - Rush Street Interactive Inc (RSI) Q4 2024:

Conference Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the RushStreet Interactive Fourth Quarter and Year End twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Please note that this conference call is being recorded today, 02/26/2025. I will now turn the call over to Kyle Sowers, the Financial Officer. You may proceed.

Kyle Sowers, Financial Officer, RushStreet Interactive: Thank you, operator, and good afternoon. By now, everyone should have access to our fourth quarter and year end twenty twenty four earnings release. It can be found under the heading Financials Quarterly Results in the Investors section of the RSI website at rushstreetinteractive.com. Some of our comments will be forward looking statements within the meaning of the federal securities laws. Forward looking statements are not statements of historical fact and are usually identified by the use of words such as will, expect, should or other similar phrases and are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

We assume no responsibility for updating any forward looking statements. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non GAAP measures, which we believe can be useful in evaluating the company’s operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

In particular, we will be discussing adjusted EBITDA, which we define as net income or loss before interest, income taxes, depreciation and amortization, share based compensation, adjustments for certain one time or non recurring items and other adjustments that are either non cash or not related to our underlying business performance. A reconciliation of these non GAAP measures to the most directly comparable GAAP measure is available on our fourth quarter and year end twenty twenty four earnings release and our investor deck, which is available on the Investors section of the RSI website at brushstreetinteractive.com. For purposes of today’s call, unless noted otherwise, when discussing profitability, EBITDA or other income statement measures other than revenue, we’re referring to those items on a non GAAP adjusted EBITDA basis. With me on the call today, we have Richard Schwartz, Chief Executive Officer. We will first provide some opening remarks and then open the call to questions.

And with that, I’ll turn the call over to Richard.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Thanks, Kyle. Good afternoon, and welcome to our fourth quarter twenty twenty four earnings call. I’d like to begin by expressing my gratitude to the entire RSI team for their outstanding efforts. Their dedication and hard work have been instrumental in our success. I couldn’t be more proud of the incredible team we’ve built over the years.

Your dedication is a key reason we excel in such a competitive industry. As I reflect on our performance in 2024, this has undoubtedly been our best year ever. We not only set records in revenue, profitability, cash flow, margins, user accounts and many other key KPIs, But we also made significant advancements in our technology platform, strategic initiatives and customer centric experiences, demonstrating an ability to execute while scaling effectively. Most importantly, we believe we have positioned ourselves for success in the years ahead. We concluded the year with a record setting quarter in both revenue and adjusted EBITDA, exceeding the high end of our most recent guidance.

For the year, we grew revenue 34%. While this top line growth was impressive, what stands out was our ability to drive 36% of that growth to the bottom line. We expanded gross margin by over 200 basis points, reduced marketing expense compared to last year and gained leverage over our G and A costs. As a result, we saw an 11 times increase in adjusted EBITDA for the year. Our long term focus and expertise in creating differentiated and high quality user experiences are paying off.

We have simultaneously achieved our growth and profitability targets across our entire portfolio, while increasing contributions from all geographies, both iCasino and Sports and from both our newer and more mature markets. As we take stock of our progress, our focus on three key principles has positioned us for long term success. First, our customer centric approach prioritizes a world class user experience. This is easier said than done. It requires a clear vision, in house technology, innovative product teams, seasoned operations teams and deep user insights.

Our players notice and appreciate how we take care of them from exceptional customer service and reducing friction in their journey to our unique real time rewards system. This proprietary system delights our players in unexpected ways, including offering extra chances to win through fun and engaging in house developed content that delivers secondary gaming experiences not available elsewhere. Second, our continuous investment in in house technology supports diverse and innovative product features. These new features often require a deep understanding of our users and sophisticated development. Our commitment to technology will ensure we stay ahead of the curve.

Third, as evident in our results, we leverage operational efficiency to scale and enhance margins. This approach has driven our recent strong results and underscores our commitment to becoming a leader in online gaming across The Americas. Regarding the quarterly results, as investors evaluate our performance, there are a few takeaways worth pointing out. As referenced earlier, we’ve experienced broad based growth. Top line performance was strong once again with strength across products, both online casino and online sportsbook each grew over 27%.

We are also continuing to experience strength across geographies. North America Online grew 29%, while LATAM grew 54%. This growth was in the face of player favorable NFL outcomes in the Q4, reinforcing the consistency and diversification of our revenue streams. Underlying these results are strong trends in both player accounts and player values. For the fourth quarter, North American MAUs were at all time company record of $205,000 up 28% year over year marking another consecutive quarter of accelerating growth.

ArtMau in North America increased to $346 The fast growth in players, while maintaining our leading ArtMau level, is a true testament to our underlying strategic focus on user engagement and retention. In Latin America, we continued to experience high levels of growth with our MAUs increasing year over year by 71% to 348,000. This increase highlights the effectiveness of our localized strategies and teams and our ability to attract and retain users. Our ARPMOW in the region was $39 When measured in local currency, this increased both sequentially and year over year. Our marketing efforts continue to yield positive results, building on the strong foundation laid in previous quarters.

Our MAU and Art MAU trends are being driven by our targeted and data driven marketing efforts. Our campaigns have effectively leveraged a mix of traditional and digital channels, allowing us to reach a broad audience and attract new users at a very solid pace. While we’ve made tremendous improvements in our marketing efficiency over the past couple of years, we continue to improve and find new strategies to maximize effectiveness. Overall spend continues to deliver strong results as evidenced by our continued momentum in MAUs and ART MAUs. We are closely monitoring the twenty twenty five legislative sessions in several U.

S. States and Canadian provinces for potential online casino legalization and expansion opportunities. We cannot predict specific outcomes, but there is a growing recognition that online casino gambling is already happening in these places and across The United States and Canada through offshore, unregulated and unlicensed sites, including online sweepstakes casinos that offer real money games that look and feel exactly like regulated sites, but pay no taxes and lack player safeguards and protections. Regulation is a proven way to protect players and generate significant tax dollars to fund critical government budget initiatives like education, health care and other important programs. We remain dedicated to delivering value to our shareholders and providing an unparalleled gaming experience to our users.

The success we experienced in 2024 sets a strong foundation and we are optimistic about maintaining our strong momentum into 2025. Our focus will remain on delivering consistent performance and driving value for our shareholders. With that, I’ll turn the call over to Kyle.

Kyle Sowers, Financial Officer, RushStreet Interactive: Thanks, Richard. Fourth quarter revenue was $254,200,000 up 31% year over year leading to full year 2024 revenue of $924,100,000 up 34% year over year. Our growth in the quarter and the full year was well balanced across both iCasino and Sports and also across geographies. In the fourth quarter, gross profit margin increased to 36.5%. We continued the improvement in our revenue diversity and drove higher revenue growth in our more profitable markets.

For the full year, gross profit margin was ahead of plan at 35%, an improvement of over 200 basis points versus the prior year. We achieved sequential improvement in gross margin in each quarter throughout the year. For 2025, we expect our gross margins to continue to improve as the revenue mix continues to improve and we execute on cost improvements. On the marketing side, we continue to stay disciplined and refine our spend. We are spending more in markets where we see better opportunity of returns and we will continue to be flexible with those investments.

In fact, in Q4, we increased marketing spend once again and had our highest spend in the last seven quarters, while importantly still achieving leverage over our marketing spend and delivering another record EBITDA quarter. Fourth quarter marketing spend was $43,100,000 or 17 percent of revenue compared to 17.8% of revenue last year. For the full year, adjusted advertising and promotion spend was $155,800,000 down from $158,400,000 last year. We see the efficiencies evident in our growing active user count and getting a larger share of wallet from our players measured by increasing ARP amount. Looking ahead to 2025, we expect you’ll see continued discipline from our marketing efforts.

And while we won’t be shy about making investments when we see the opportunities, we do expect to get incremental leverage over our marketing spend again in 2025, so marketing spend that grows at a lower rate than revenue for the year. G and A for the fourth quarter was $19,000,000 or 7.5% of revenue compared to 8.4% last year and then for the full year was $74,800,000 or 8.1% of revenue, which compares to 8.8% last year. For 2025, we expect to get some modest leverage over our G and A expense and come in less than 8.1%. Similar to years past, much of the run rate increase in G and A will come in the first quarter as we have our annual compensation adjustments for employees. Our adjusted EBITDA for the fourth quarter was 30,600,000 reflecting a significant increase of over 2.5 times compared to the prior year.

For the full year, adjusted EBITDA of $92,500,000 increased more than 11 fold compared to the prior year. In 2024, we made a tremendous leap in obtaining benefits from the increasing scale in our business. We were also able to demonstrate a strong flow through from earnings to cash flow highlighting what we see as a very high quality of earnings. We ended the year with $229,000,000 unrestricted cash and no debt, an increase of approximately $61,000,000 for the year. During the fourth quarter, we did not buy back any shares under our repurchase authorization.

We are initiating full year revenue and adjusted EBITDA guidance for 2025. We currently expect revenue to be between 1,010,000,000 and $1,080,000,000 which represents $1,045,000,000 at the midpoint, up 13% year over year. For the full year 2025, we currently expect adjusted EBITDA to be between $115,000,000 and $135,000,000 which represents $125,000,000 at the midpoint, up 35% year over year. Our guidance ranges for revenue and EBITDA include a range of potential business impacts from the recent tax changes in Colombia with the assumption that the tax lasts through the end of the year. As you saw in our eight K from last week, the Colombian President has issued an emergency decree to, among other things, levy a tax on players for deposits made into online betting accounts.

There is currently a review of the constitutionality of this decree, the applicability of the tax and the temporary time frame over which it can be administered, Including the court’s automatic review that is expected during the next few months, we anticipate several strong legal challenges on constitutionality. If the tax were to be repealed or shortened, we would expect to see upside to our guidance ranges. In addition to the Colombian tax, other considerations that help bridge the difference between the low and high ends of our revenue and EBITDA guidance include the growth of the markets that we are in, our ranges of continued success in attracting new and monetizing existing players, our varying levels of marketing investment and potential currency movements in our Non U. S. Markets.

And as a reminder, our guidance includes only those markets that are live as of today. With that, operator, please open the lines for questions.

Conference Operator: Thank you. We will now begin the question and answer session. The first question is from the line of Dan Ahlitzer with Wells Fargo (NYSE:WFC). You may proceed.

Dan Ahlitzer, Analyst, Wells Fargo: Hey, good afternoon, everyone. Thanks for taking my question. First, just to follow-up on the guidance, Kyle, you mentioned that it does include Colombia. Is there any way to quantify that what’s being baked in right now? And then separately along the same line, as you think about that kind of midpoint of 13% revenue growth for 2025, is there any way that you can kind of further unpack that between Latin America and U.

S. Or even within The U. S. IGaming and how you’re thinking about the growth for 2025? Thanks.

Kyle Sowers, Financial Officer, RushStreet Interactive: Sure. So I’ll start with the Columbia piece, just to make sure it’s absolutely clear that both the high and low end of our ranges for revenue and EBITDA include the impact of the VAT, assuming that it’s in place through the end of the year. So we just want to make sure that that’s clear that if the tax were to be reversed or shortened that provides upside to both the bottom end and the top end of our guidance. When you think about what we’ve included for Columbia, listen, we’re just we’re only a few days into this. So we’re learning as we go here what the impact might be and then it will take a while to have all that flush out.

But at the low end of the guidance, I’d assume that’s a pretty bad outcome for Columbia for the year and how it’s played out. And at the high end of the guidance, it’s more around things turning out pretty well there given the circumstances. And then when thinking about the other 85 plus percent of the business on the revenue side, we’re expecting growth in almost all of our markets. Certainly, an expectation that much more of our absolute growth is coming from markets that include iCasino. That’s as you know, that’s where we’ve been putting more of our investment dollars from marketing.

It’s where we see higher player values, where we offer really great differentiation in the product and obviously have been continuing to have a lot of success in Q4 and so far here in the start of Q1.

Dan Ahlitzer, Analyst, Wells Fargo: Got it. That’s helpful. And then just for my follow-up, obviously, it’s been a pretty heavy headline cycle in terms of taxes and proposed increases for sports betting and iGaming. I guess, is your guidance faking in anything along those lines? And I guess more broadly, how do you think about that risk across the myriad of states that have proposed something in some form versus maybe the upside risk of past the legalization for high gaming in some of these states?

Kyle Sowers, Financial Officer, RushStreet Interactive: Yes. So, I’ll hit the guidance piece. But we have not outside of Colombia where we have assumed it for the full year, the VAT deposit tax, we have not included other scenarios of tax changes in other markets that we’re in. So, just like we do not have included in our guidance new markets that might go live sometime later this year, we’re also not including any proposed legislation around taxes. To the extent something were to be approved and legislated in the future, then we’d of course consider that for the future guidance.

But the guidance we have right now does not include any tax changes. And then I’ll let Richard just comment on the landscape.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Sure. Hey, Dan. On the subject of tax increases, there’s no doubt a substantial tax increase is a near term setback. But we view it as a clear display of the need for states to raise taxes. And while states are looking at all in gaming industry to raise funds, it cuts both ways.

And in some ways, including on a net net basis, we believe it’s actually really beneficial for our industry and for us especially if it accelerates expansion of opportunities. And so we know that the legalization of online casino is one of the most attractive and proven options to raise funds. And let’s not forget that 88% of The U. S. Adult population can play regulated online casino today.

It’s a large population available for us to sort of be able to work towards legalization efforts. So while in the near term, you might have a couple of hiccups, ultimately, we think that the net net is positive for us as you start to see the needs for the states accelerate the revenue generation and online gaming can represent a very substantial way for them to achieve their goals.

Conference Operator: Thanks.

Dan Ahlitzer, Analyst, Wells Fargo: Makes sense. Thanks so much for all the detail.

Kyle Sowers, Financial Officer, RushStreet Interactive: Thanks, Dan.

Conference Operator: The next question is from the line of Ryan Sigdahl with Craig Hallum Capital. You may proceed.

Ryan Sigdahl, Analyst, Craig Hallum Capital: Hey, good afternoon guys. Really nice results. I want to stay on Columbia for a minute. So I know it’s early. I know it’s the first few days.

It looks like at least one of your competitors is passing on the cost directly to the consumer, to not a lot of fanfare there. Many others are straight out absorbing the cost. Rushbet appears to be somewhere in the middle, kind of passing along, but offering a VAT bonus to the consumer. I guess thoughts on how you think this is working thus far in the first couple of days from a retention standpoint, competitive standpoint? And then if you’re willing to kind of how much of that cost you think you can mitigate with this strategy?

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Sure. Why don’t I start and maybe you can add on the mitigation element, Kyle? Yes. I mean, the competitors are all trying to determine like we are how to manage this most effectively. There’s different levels of approaches and sophistications vary.

I feel really good about our situation and the positiveness because of our technology and the fact that we can do a lot of things with our platform that are very common to be able to do it from others in terms of segmentations to ensure the proper players are getting the bonuses. So I think we have our the ownership of our own platform provides us with the ability to really be nimble and smart when our especially with our bonusing strategies. I think we’ve already seen some operators start with one approach and change their approach pretty drastically. And what we’re doing is really staying the course and modifying and tweaking and monitoring situations to ensure that we’re always looking out for the players that matter most for our business. So I think it is really early, hard to really get into too much more detail because it’s so dynamic and fluid.

But I will say that I’m confident we have the best team in the industry down there and a very top quality platform for the market, which should allow us to manage through this better than our competitors.

Kyle Sowers, Financial Officer, RushStreet Interactive: Yes. Maybe just on the mitigation. Ryan, as you pointed out, it’s super early. Things are holding up well down there. There’s things we’ve already done immediately.

You mentioned some of the different kind of competitive responses to this. So you’re right, we’re modifying the way that we’re handling promotions. We and the rest of the industry have the ability to reduce marketing spend and we’re doing some of that. And then we look to our vendor partners to help share in the impact and we’ve got a lot of costs that are variable with revenue. And as Richard pointed out, I think we’ve got we feel like we’ve got some advantages because of owning our own platform, our proprietary bonusing engine and probably allows us to do some things differently than our competitors to excite and retain those players and we’re well capitalized.

We’ve got a really strong player friendly brand down there. So, we’re optimistic. It’ll turn out better than it could and things are holding up pretty well so far.

Ryan Sigdahl, Analyst, Craig Hallum Capital: Great. For my second question, just want to move over to Delaware specifically. So really impressive results. Basically grew almost every month sequentially up, up triple digits, etcetera, all the way through January of last month. So I guess as you think about that market, it’s continuing to outperform.

Is 2025 the year of let’s continue to lean in and invest in that market? Or is it the year where you can start to really drive margin even better? Thanks.

Kyle Sowers, Financial Officer, RushStreet Interactive: Yes. So you’re right. I think the data came out for January not too long ago. We’ve continued to have really strong sequential growth. As you point out, almost month after month like clockwork.

And so, we’re very, very, very proud of that. We reached a GGR run rate over $125,000,000 in the fourth quarter, so and then it grew again in January. So we’ve got a lot of opportunity still there. And I think from a margin perspective, I think our margins are more fixed there from an operating perspective, not completely, but fairly fixed. So, it’s going to be more about driving new players and player monetization, which we think there’s a lot of room left to grow there.

Obviously, our growth rate in the early part of the year from Delaware is going to be more significant than it’s likely to be later in the year, just given the launch date right at the end of twenty twenty three, but a lot of opportunities still left there.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Very good. Thanks guys. Good luck.

Kyle Sowers, Financial Officer, RushStreet Interactive: Thanks, Ryan.

Conference Operator: The next question is from the line of David Katz with Jefferies. You may proceed.

David Katz, Analyst, Jefferies: Good evening. Thanks for taking my question. I wanted to just raise the issue of sweepstakes, getting a lot of discussion at least among us. Curious what your perspectives on it are? What it can lead to?

What impacts it’s having? And any thoughts to that end I think would be welcome and helpful? Thanks.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Yes, sure. Hi, David. Yes, I mean, I referenced a little bit on this earlier. But at the end of the day, you have a product that is online casino that looks and feels and plays like a regulated online casino product that is not regulated, not taxed, not protected and dominated in the markets around the country right now because there’s a free for all and a proliferation of a Wild West mentality that I think ultimately, it is surprising when you get some of the land based casinos opposing online casino, regulated online casino, you don’t hear what efforts are being put into stopping the sort of unlicensed activity that’s proliferating in their states today. So absolutely, it is having an impact despite what everyone can come up with research that tries to make any point they want.

But ultimately, it is a product that is trying to circumvent the gaming laws, the gambling laws on a state by state level. And I certainly think there should be enforcement to ensure that there’s an even playing field for all participants and to ensure that all online casino gameplay is being regulated, taxed and properly protected. There’s a lot of minors, especially, that are playing many of those products. And I think it’s in the industry’s interest to ensure that gets enforced and to be brought into proper regulatory frameworks. And ultimately, this existence of this activity is a really great accelerator in addition to the tax needs of the states to legalize online casino because online gaming is online casino gaming is already existing.

So might as well tax it to protect consumers. So I think there’s really winning arguments in favor of accelerating iCasino legislation to address this current issue that exists.

David Katz, Analyst, Jefferies: Thanks for that. And I wanted to just follow-up on the sports betting side. We spend a ton of time talking about sort of product mix and different kinds of bet offerings etcetera and their abilities to drive margins. I’d love your updated thoughts on things such as in play betting and just general commentary around your product mix. And that’s it for me.

Thanks.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Sure. I mean, in play betting is certainly always known to be an important category of sports betting. You see in European markets, what, every year for almost a decade or two, you’ve seen improvements, increases in volume and frequency of in game betting. So certainly, for us, we’ve invested in that from the very beginning. And a lot of the sports that are very fast paced that appeal really well to in game betting like soccer and tennis, we’ve really achieved some strong results.

And in fact, we have some podcasts in that area that really drive a lot of volume of traffic and interest in that category. And we’ve really targeted that audience knowing that some of our competitors that focus more on historically on The Daily Fantasy didn’t really have the same sophistication in terms of built up audience in the tennis and soccer category. So we did focus and have focused on that. I think product mix is critical. But the player props are also very popular.

And as you’ve also seen from us and the rest of the industry, Parley has shown they have some staying power and we put a lot of effort into improving our experience for our players in that area. A lot of these innovative promotional tools that we have built that are unique to the industry that I referenced earlier as not being available to play anywhere else are really making a difference for us. So we’re continuing to invest in those types of experiences knowing that at the end of day, the players realize when you’re doing something unique and different for them and they like something you’re doing that isn’t available anywhere else, they’re going to stay loyal with you. And that’s what helps drive our player counts and player values.

David Katz, Analyst, Jefferies: Thanks very much. Appreciate it.

Kyle Sowers, Financial Officer, RushStreet Interactive: Thanks, David.

Conference Operator: Next (LON:NXT) question is from the line of Bernie MacTernan with Needham and Co. You may proceed. The next question is from the line of Jed Kelly with Oppenheimer. You may proceed.

Jed Kelly, Analyst, Oppenheimer: Hey, great. Thanks for taking my question. I guess just kind of circling about back to New Jersey and say they do raise taxes, typically with Internet companies, when there’s a period of like tighter regulation or higher taxes, you generally see the larger players lean in and market more. So just given where your market position is in New Jersey, how would we expect under a higher tax scenario you to operate? And would you not want to lean back on marketing?

And then just the point on future iGaming, iCasino regulation, It’s been a while since we have seen states start to legalize. I mean, can you do you see any catalyst or anything we get to budgets deficit to meeting revenue, but is there anything that’s kind of why the pace has been so slow over the past two years? Thanks.

Kyle Sowers, Financial Officer, RushStreet Interactive: Joe, maybe I’ll take the New Jersey piece first. I think it’s probably too early. I mean, we obviously have a really strong brand in that area of the country. We’ve built a really solid customer base. We’re well capitalized.

I think we have to evaluate the situation and look at what’s happening within competition. I don’t think this level of tax that’s being talked about means you’ve got to dramatically change the way that you’re marketing, but you would need to mitigate some of that. So I think it’s probably too early for us to say what we’d do from a competitive standpoint there. I’ll let Richard talk about the, kind of

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: the legacy

Kyle Sowers, Financial Officer, RushStreet Interactive: in the legislation. Yes, sure.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: There’s more efforts going into this than ever before. If you just listen to the earnings calls from our competitors this week and previously in the prior weeks, you’ll see that everyone’s focused on it, which is a tremendous difference from where it was a couple of years ago where you didn’t hear anything about efforts to legalize live casino. It’s really all about sports betting. As the profits from live casino have improved and the tax base increased, you’re starting to see a lot more focus on this category. And so with that, you get alignment with groups that are focusing on aligning together in the industry to achieve a result of improving legalization in more markets.

But as I said a few minutes ago, this exists the fact that online consumers are already happening in every state in The U. S. And it’s not being taxed or regulated or not protecting consumers is a really strong accelerant that helps us to sort of make that point why you might as well protect consumers and tax it. I think the fact that you have some improvements happening in efforts in Alberta are making progress. I think there’ll be some spring legislative session.

It’s expected to sort of show some progress here. And I think there’s some positive developments that are happening even this week. So we’re looking forward to Alberta moving forward. But you’re starting to see the states you start to see the cracks in the state budgets where as the federal government is less willing to perhaps fund the states to level in the past, they are looking for additional ways to generate income and taxes. And as I said, iCasino is an incredible way for them to achieve that result.

And especially for the states that are already enforced and legalized, regulated, very simple add on. So I think you’re going to see a lot more movement in this area perhaps than you have in the last year or two based on those factors.

Jed Kelly, Analyst, Oppenheimer: Great. That’s helpful. And you think that message is starting to resonate with the governors?

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: I think it’s starting to more really now. You’re starting to see the pressure. In fact, the pressure, as I said earlier, for states to start to look for gaming to increase the taxes from our industry is sort of the signs that other states and governors are also looking for ways to increase revenues and this is a easy way to do it. So I do think that message is starting to percolate and I think the need is for state revenues to increase is more than it has been in the past years.

Jed Kelly, Analyst, Oppenheimer: Great. Thank you and nice job.

Kyle Sowers, Financial Officer, RushStreet Interactive: Thanks, Judas.

Conference Operator: The next question is from the line of Chad Beynon with Macquarie. You may proceed.

Chad Beynon, Analyst, Macquarie: Hi, good afternoon. Thanks for taking my question. Richard, Kyle, I wanted to ask about M and A opportunities and buybacks. So given the cash that you have at the end of the quarter and the outlook for ’25, this will obviously continue to build. Can

Jed Kelly, Analyst, Oppenheimer: you

Chad Beynon, Analyst, Macquarie: kind of help us think about maybe the magnitude of buyback opportunities? And if you’re not participating there, is it because you’re in the market looking for tuck in acquisitions on the M and A side? Thanks.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Sure. Kyle, why don’t you take the pie back, then I’ll take the M and A part of it.

Kyle Sowers, Financial Officer, RushStreet Interactive: Yes. So, I appreciate the question, Chad. I wouldn’t listen, we’ve I think we’re comfortable with our cash position. You’re right, that cash position should continue to build nicely. I wouldn’t correlate our activity executing our buyback with some indication about M and A activity and the timing of that.

I think those are while they ultimately can impact each other, I wouldn’t necessarily go to that direct correlation. So, we didn’t buy back any stock in the fourth quarter after our authorization. We are going to continue to be opportunistic. We’ll continue to monitor the situation. I think despite the near term headwinds here from this temporary tax in Colombia and obviously came out with what we felt like was strong guidance in particular in the face of that, we’re very confident in the business trends throughout the business and we’re intent on driving shareholder value.

So some of that could include returning capital in the form of share buybacks. And I’ll let Richard talk about M and A landscape.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Yes. I mean, we’re actively assessing and considering options all the time. It’s what you have to do in our business. And we have a very clear focus on sort of line of sight that we have a profitable business in our company. We have opportunities to improve it in Latin America potentially.

We’re looking at options, bolt on opportunities, anything that can add value for the shareholders. Ultimately, having a $229,000,000 now of unrestricted cash and growing our cash flow, great balance sheet gives us a lot of flexibility and a lot of options. And our only focus is on what can we do to invest this capital to deliver the best return for our shareholders. So we do consider all the M and A options and we have an active team that’s always considering different variations and possibilities.

Chad Beynon, Analyst, Macquarie: Great. Thank you, both. And then on the guidance, not sure if you guys build top down or bottoms up, but as we think about the sports betting hold improvements, getting the product features that continue to drive higher hold, is there an expected sports betting hold increase that’s implied in your guidance for 25%? Or are you not building it that way and you’re simply looking at the MAUs and kind of driving a certain amount of revenue out of those customers? Thank you.

Kyle Sowers, Financial Officer, RushStreet Interactive: Sure. Thanks. So it’s a combination of those. And obviously given that we plan in our guidance for a lot of different scenarios, it does include both those. I’ll say that we improved sports hold in 2024.

We actually improved our sports hold in Q4 of this year compared to the prior year despite the NFL outcomes that we all dealt with. We improved it in as a company in North America and in Latin America. So we’re pretty pleased with that. There have been a lot of product improvements and mix improvements. So we are expecting additional hold improvement in 2025 versus 2024.

David Katz, Analyst, Jefferies: Thanks, Kyle. Nice quarter, guys.

Kyle Sowers, Financial Officer, RushStreet Interactive: Thanks, Jeff.

Conference Operator: The next question is from the line of Jordan Bender with Citizens. You may proceed.

Jed Kelly, Analyst, Oppenheimer: Afternoon, everyone. Maybe just follow-up on the outlook. The implied flow through for the year in 2025 is below what you saw in 2024. And from what I understand, Columbia is a pretty variable business model, so that shouldn’t hurt too much to the downside. So is there anything to call out in terms of why that’s the case?

And is it kind of just conservatism baked into the guidance? Thank you.

Kyle Sowers, Financial Officer, RushStreet Interactive: Yes. Thanks, Jordan. So it’s a good point. The midpoint of our guide this year flow through is around 27% and that compares to what was 36% last year. And so just maybe to think about last year, 2024 benefited from an actual absolute dollar decrease in marketing spend compared to 2023.

And we reduced marketing nicely, but still drove that 34% revenue growth. In 2025, we have plans to increase marketing spend. We still plan to get leverage over the marketing line, but that difference is the primary driver of the flow through between 2024 and 2025.

Jed Kelly, Analyst, Oppenheimer: Great. And then a lot of the outlooks from your competitors include commentary around promotions continuing to come down. So as we see the competitive environment continue to ease around you, are you looking to any states that you’re not currently operational as the competitive environment lessens ahead of you?

Kyle Sowers, Financial Officer, RushStreet Interactive: Jordan, is your question states that we have not entered from a sportsbook only perspective in the past? And are we reconsidering those? Is that the gist of the question?

Jed Kelly, Analyst, Oppenheimer: Yes. As the competitive environment in OSB only states you’re not in, starts to ease, does it make it any more attractive for you guys to go operate there?

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Yes. So we have these parameters that we look at for every jurisdiction and the tax rate, the cost to entry, will iGaming be in the future likely to be in the future added. And so those are things that we’ve looked at in the past. I think looking at a competitive landscape, you start to see that even though you might have a diminished number of competitors in some of these jurisdictions, the ones that are actually carrying all the financial results are still in these markets and continue to invest. So I think that there are we always look at markets we haven’t got in to decide whether we want to go into them.

But there isn’t something that unless we see an outlook change where we think iCasino is going to be accelerated in that jurisdiction or there’s an opportunity, I don’t think it’s going to raise the level of opportunity that we have in front of us because we have so many other great opportunities ahead of us. We can’t get to them all, including all the labs in American markets that we have opportunities in. So we’re not going to just sort of chase a sports group market coming in late where we don’t really see a strategic value longer term for us outside of the sports betting business.

Jed Kelly, Analyst, Oppenheimer: Great. Thank you very much.

Conference Operator: Thanks, George. The next question is from the line of Joe Stauff with Susquehanna. You may proceed.

Joe Stauff, Analyst, Susquehanna: Thank you. Hi there, Richard. On the North American growth outlook in ’twenty five, I was curious about how you think about user growth versus the growth in Artemao. Is it fair to assume that you would think that Artemao is going to grow faster than user growth? And then almost a related topic, I was wondering if you can comment just on the level of penetration, so to speak, within iCasino.

It’s a pretty finite market right now. You guys have been operating and really doing well in all those states. And I’m wondering, is the opportunity set to grow and to expand the penetration rate of adults that really choose to use iCasino, where are we kind of in that continuum?

Kyle Sowers, Financial Officer, RushStreet Interactive: Yes. So, I can start. I think on the MAO versus Art MAO and where is the growth coming from, I’d expect that it’s going to be a nice combination of both. I mean, if you look at our player counts throughout 2024, I mean, just this last quarter, we grew North America by twenty eight percent. And that was the highest quarter for the year.

Now, we benefited from Delaware in those numbers throughout the year. But even without Delaware, we would have had accelerating and sequential user counts for, geez, almost the last two years. So, even ex Delaware, we’ve had really good user count growth. And more of that has been in iCasino markets than sports markets. So some of it some of that player value and whether it’s our mal growth or mal growth is going to come down to, are we bringing in more casino players than sports players, who are generally more the casino players being more valuable?

So I think there’s an opportunity for both of those to be driving the revenue growth and be a nice balance there.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: I guess I could jump in on the maturity of the markets. Every state has a varying level of maturity. Of course, New Jersey was the first to do I Casino (EPA:CASP) and for us, Delaware has been the most recent one. So what you’ve seen in the European markets, and I grew up in the European markets years ago, is that twenty years of growth in these regulated markets, at least that you saw consistent growth. And you’re seeing that here in The U.

S. At all markets still growing. Even the most mature market in New Jersey has continued to grow at record rates. So I think what you’ll see is that there’s a large population that hasn’t tried iGaming in many markets. And over time, as everything else becomes more digitalized, you get more people willing to try and embrace the benefits of digital gaming.

You still see the land base still maintain their revenues, but you start to see the states benefit even more from the increased iGaming player bases that will play both online and land base, and those players will also only be digital. But you always also grow an audience every year by people getting become the proper Asia gambles, a new class of people every year. And on top of that, you just have a larger number of existing populations in The States that are going to try for the first time. So I just think that this industry, as you look back in European markets, you’ll see that it has it’s not surprising to me that it’s been consistently growing in The U. S.

I would expect that to continue based on my experiences in other European markets prior to The U. S. Market opening up.

Kyle Sowers, Financial Officer, RushStreet Interactive: Yes. It feels like all the analysts that have covered this industry, have kind of under putted on their estimates on the TAM, And everyone has to keep raising them time after time. So, maybe everyone’s got it right at this point, but it sure seems like there’s opportunity for that to continue to grow.

Joe Stauff, Analyst, Susquehanna: Yes. And I appreciate that response. And I guess I was wondering maybe if you could Part three of the question is like there certainly was a reacceleration in iCasino growth in the second half versus the first half. And I’m wondering if you can comment on reasons why you think that is in aggregate.

Conference Operator: I’ll leave it wide open if you could.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Yes, Joe. I mean, we need to focus on ourselves. And we know that as you’ve seen, we’ve had tremendous growth. And I think we’re getting better at everything we’re doing, releasing great new product features and innovations. And you can see that and this is really simple at the end of the day.

It’s about getting player counts, increasing player counts and increasing player values. And we’ve done both. So if you do that, you’re going to grow your business nicely. And you do that by offering players a great user experience. And so what we do is we focus on execution and the things that we can control, which is exactly what I described.

Joe Stauff, Analyst, Susquehanna: Thank you, guys.

Conference Operator: The next question is from the line of David Hornthall with Private Securities. My apologies. It looks like the last question was our last question. I would now like to pass the conference back over to Richard for any closing remarks.

Richard Schwartz, Chief Executive Officer, RushStreet Interactive: Appreciate it. Well, thank you again for joining us today. We look forward to updating you on our progress when we share our first quarter results in the spring.

Conference Operator: That concludes today’s call. Thank you for your participation and enjoy the rest of your day.

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