BetRivers Parent Raises Guidance After Record Q1 Results

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Rush Street Interactive raised both revenue and EBITDA guidance for 2024 after a strong first quarter for BetRivers.

BetRivers kept the strong momentum with which it closed out 2023, CEO Richard Schwartz said on its first-quarter call. The company saw sports betting and iGaming revenue both up more than 35%.

Rush Street now expects between $50 million and $60 million of adjusted EBITDA in 2024, raising the midpoint by $15 million compared to previous guidance. That will come off revenue that will fall between $810 million and $860 million, up $35 million at the midpoint.

RSI popped on the bullish report, with the stock opening Thursday at $7.86. That was up 22.4% from Wednesday’s open.

Is Rush Street Interactive for sale?

Schwartz noted he “read the same article you referenced and hear the same speculation that you have” when asked about the rumor reported by Bloomberg that Rush Street pitched itself to DraftKings. While he did not touch on specifics, he did not deny that the company is looking at alternatives.

“But what I can say is that the board and the management regularly evaluate all opportunities that we have and our goal is to always maximize shareholder value,” Schwartz said. “As substantial shareholders ourselves, the management team, we’re fully aligned with the shareholders.

“What we have built and continue to build is what we believe is tremendous value to our investors. And we have a lot of assets that are valuable to us is like they’re interesting to other companies and we will continue to evaluate all opportunities as part of our shareholder obligations.”

Asked why not start a formal process of a strategic alternative, “I can’t respond to that question in this public setting,” Schwartz said.

BetRivers Q1 details

The records continued with important key performance indicators hitting new highs, too.

Monthly active users in the US and Ontario increased 20% in the quarter to 176,000. That number has increased each of the last six months, Schwartz said.

The Latin America segment, which includes Mexico, saw monthly active users jumped 72% to 224,000.

Even with that influx of new customers, Rush Street took more wallet share from its customers in the first quarter. The US and Canada saw average revenue per monthly active user up 9% to $355, while Latin America’s monthly actives spent $43 on average, a 4% increase.

Record depositors, too

The first quarter also brought the largest influx of first-time depositors to the company, Schwartz said. It was the most first-time depositors in the US since New York launched in the first quarter of 2022.

Those depositors came more efficiently than ever before. Cost per acquisition is less than half of what that cost was a year ago, Schwartz added.

Tough comparisons incoming

One analyst called out that the updated guidance might suggest a deceleration in the back half of the year despite easier comparison periods. That is not exactly the case, though, CFO Kyle Sauers explained.

Hold rates in sports, and to a lesser extent online gaming, were at the higher end of expected ranges in the second and third quarter of last year, Sauers added.

Adjusted EBITDA flips positive

Rush Street managed to narrow its net loss to $2.2 million compared to a loss of $24.5 million last year. That led to adjusted EBITDA hitting $17.1 million in the first quarter, up nearly $26 million from 2023.

Rush Street notoriously watches its expenses and does not extensively promote, which helped adjusted EBITDA turn positive combined with record revenue. Advertising and promo expenses fell 23.1% to $38.4 million as Rush Street marketed less than it expected in the first quarter.

That helped offset a 34.9% increase in cost of revenue, which hit $144.5 million for the quarter.

Not marketing at the same level as operators like DraftKings and FanDuel naturally leaves BetRivers with a much smaller portion of the pie, though Rush Street has preached quality over quantity in that regard. BetRivers ranked fifth in 2023 in terms of both sports betting handle (3.5%) and revenue (2.5%) from the states that break out data by brand.

BetRivers starts strong in Delaware

BetRivers continues to grow in Delaware, where it is the exclusive online sports betting and online gaming partner of the state’s three casinos.

Annual revenue run rate hit nearly $70 million in the first quarter, up from the $60 million Rush Street mentioned at its fourth quarter earnings. BetRivers did more than four times the revenue in March that 888 did in the same month last year, with 75% of that coming from iGaming.

Schwartz noted the bill introduced in the Delaware legislature that would expand the market to multiple betting operators. Rush Street has support from “key stakeholders,” he said, and reminded the call that even if it passes, BetRivers would remain the only online casino operator.

BetRivers adding new online casino products?

Schwartz confirmed BetRivers is working on deeper product types and categories when it comes to iGaming that will be launched later this year. He hesitated to get into specifics, though.

“I think on a public call like this I’ll have to be a little bit careful on the specifics for competitive reasons, but I will tell you that we are unique in that we know how to manufacture fun as an operator,” Schwartz said. “Most companies or operators don’t create it. They sort of license it from third-party suppliers.

“… There’s a couple of big ones coming down the pipeline that we’ve been working on very closely that we’re very excited about. Again, I think most company strategies are to aggregate game libraries from as many third parties as possible. We do that probably better than many of our competitors, but it’s not something that’s unique to us.

“But where we really differentiate ourselves is the ability to create community features, site-wide community features, gamified features, social experiences that are unique to our site offering ways for players to win in unique ways that aren’t available elsewhere and creating a fun experience for players that they really can’t repeat if they play somewhere else.”

Existing iGaming states performing well

There was a resurgence in Rush Street’s more mature iGaming markets, Schwartz noted.

Michigan, New Jersey and Pennsylvania had the highest year-over-year revenue growth rates seen in two years.

The combination of users growing significantly while spending more is “obviously pretty powerful,” Sauers added.

Keeping cash for new states first

Sauers noted analysts were asking whether Rush Street had enough cash on hand to keep operating a few quarters ago but are now asking what the company plans to do with its excess cash.

“Now we’re generating plenty, so we’re pretty excited and we’re happy to be in that position and don’t see that changing,” Sauers said. “I think in terms of use of the cash, obviously, we’re always looking at the highest return opportunities and where those might be. And that conversation evolves and we continue to look at different things.

“I think the biggest thing that we’ve got to be ready for and have dry powder for as new market launches. So that’s first and foremost. And I think the thing that we continue to look at is M&A or tuck-in acquisitions that could be additive to what we’re doing.”

Rush Street ended March with $191 million in cash.