Efficient Revenue Growth Leads BetRivers Parent To Positive Earnings

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BetRivers parent Rush Street Interactive reported strong results for the entirety of 2023, with revenue and adjusted EBITDA both growing by around $100 million.

That strong flow-through of new revenue led to positive EBITDA for all of 2023 as RSI reported $8.2 million in adjusted EBITDA for the year, up from a loss of $91.8 million in 2022. The market loved the BetRivers results, with after-hours trading pushing last Thursday‘s open to $7.16, up 32.8% from Wednesday‘s pre-earnings close.

“These results and the ensuing momentum have carried into strong guidance for the new year, reflecting our longstanding customer-centric principles and obsession with developing innovative and differentiated user experiences,” CEO Richard Schwartz said in Wednesday’s year-end earnings report.

“With a substantial cash balance and no debt, our financial wherewithal provides us the luxury of being able to continue executing on our long-term strategy and investing appropriately in new markets. Our strong launch in Delaware exemplifies our ability to identify and grow new and exciting markets, including the opportunities we are pursuing across the Americas.”

2024 outlook for BetRivers parent

Ending 2023 with a record-setting quarter gave RSI strong momentum to begin 2024, Schwartz said.

RSI provided adjusted EBITDA guidance for the first time ever with the company expecting $40 million at the midpoint for 2024. That would be nearly a 400% increase from last year.

Revenue expectations, meanwhile, set the midpoint at $800 million for the year. That would be a 16% jump over 2023.

Conservative flow-through in guidance?

Macquarie analyst Chad Beynon asked why RSI is projecting flow-through from EBITDA growth of around 30% after seeing 100% of those new revenues fall to the bottom line.

“This is the first time we’re offering EBITDA guidance,” CFO Kyle Sauers said. “So I want to be careful about offering a long-term flow-through plan, but I think we can improve that over time. We want to make sure we’re putting the right guidance out there. First time we’re offering it, something that we can work towards improving as the year goes on.”

RSI reports user growth on lower costs

Monthly active users in the United States and Canada were around 160,000 in the fourth quarter, up 7% from the prior year. Latin America saw a much larger uptick with 33% growth to 204,000.

Average revenue per monthly active user followed similar trends: $345 for US and Canada, up 5%, and $42 for Latin America, up 28%.

That growth came despite adjusted advertising and promotional expenses. RSI decreased those expenses by 45% in the fourth quarter to $34.6 million and by 27% for the full year to $158.4 million.

“Most of this increase reflects our successful efforts in player acquisition and retention across both online casino and sports betting in our existing markets,” Sauers said.

BetRivers off to hot Delaware start

The first 60 days in Delaware have “validated the impact of our high quality user experience,” Schwartz said.

The run rate over those first two months implies more than $60 million in annual gross gaming revenue, with two-thirds of that coming from online casino, he said.

Schwartz expects the state to be a meaningful contributor to both revenue and adjusted EBITDA over time.

Connecticut Lottery partnership wrapped up

Rush Street called it quits on its 10-year partnership with the Connecticut Lottery last March, though it continued to operate PlaySugarHouse into December until new partner Fanatics took over.

RSI does not aggressively advertise or offer huge promos for new customers, which made it hard to compete with DraftKings and FanDuel in the state.

The company decided ending the contract before it even entered its second year was best for the company and shareholders. Connecticut accounted for $20 million in revenue last year, Sauers said.

RSI looking at highest returns for capital

The best use of free cash flow will be those investments with the highest returns, Schwartz said.

“We are evaluating all opportunities, whether it’s more investment in existing markets or additional investments in the newly regulated markets,” Schwartz added. “We always are looking at all options on the table. Certainly, we’re always looking for how do we create more value, maximize shareholder value.”

Sauers added the first priority for capital will be investments in new markets that open up.