Five Key Takeaways From Rush Street Interactive Earnings

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Rush Street

CEO Richard Schwartz said Thursday that Rush Street Interactive has a market access partner in Massachusetts and will be a profitable company in the second half of next year.

The parent company of BetRivers and PlaySugarHouse used its second-quarter earnings call to update stockholders after a busy first half of 2022.

Rush Street Interactive provides new market updates

Schwartz and his team updated stockholders on important markets including New YorkOntario, and Mexico.

RSI sees the fact that operators cannot advertise promos in the Ontario sports betting market as a positive so far, Schwartz said. That allows BetRivers to emphasize its differentiated experience as a marketing point.

The market will lend itself to a gradual increase of customers that should continue over the next few years, he added. Growth in July has been positive, with average daily revenue 30% higher than June despite a weaker sports calendar.

Rush Street followed the Ontario launch with its Mexico launch in June. The company is using its experience in Colombia to grow market share in a measured way, Schwartz said.

Keeping a measured approach in NY

Rush Street has not been aggressive in the mobile New York sports betting market. That will continue, Schwartz said:

“We remain focused on targeting and attracting high-quality customers and retaining them with a world-class user experience, as opposed to financially incentivizing short-term behavior.”

BetRivers launched in the first wave of operators on Jan. 8 with Caesars, DraftKings and FanDuel but did not match the promotional aggressiveness of those operators. The company has market shares of 2.4% of handle and 1.7% of revenue through July.

Market access in Massachusetts

BetRivers has a market access partner into the limited Massachusetts sports betting market, Schwartz announced on the call.

He did not say whom the partner is. Rush Street has partnerships with Penn Entertainment in other states, though this might be with a different partner.

That speculation is based on the chart in RSI’s second-quarter presentation. The company lists access for both online and retail sports betting. PENN only has one license for retail betting at its Plainridge Park property, which would presumably go to its Barstool Sportsbook brand.

That could point to RSI partnering with one of the two simulcast facilities for access.

Marketing costs will rise again

RSI spent less on marketing in the second quarter than anticipated, CFO Kyle Sauers said. That shows the company’s flexibility to invest in marketing when it makes sense, he added.

That said, marketing costs will increase in the third quarter and again in the fourth quarter, though the first quarter should be the high mark for the year, Sauers said. There are seven RSI markets that have not had a full NFL betting season.

There is talk from competitors about cutting marketing spending, though the “vibe” remains competitive even though it is less aggressive than last year, Schwartz said. Either way, RSI will stay focused on its acquisition plan:

“Our strategy is to sort of focus on players – acquisition of players at reasonable rates, where we can be confident that we’ll get a positive return on those investments.”

Strong retention rates

Rush Street declined to give specifics about customer retention rates but Sauers said:

“I think when you look at what we spend on marketing and the revenue, that’s generated from our players, I think that tells you we have some really strong retention within this industry.”

Average revenue per monthly active user hit $325 in the second quarter, up 23% from the first quarter. Monthly active users hit 133,000, up 35% from last year.

Rush Street Interactive trims revenue expectations

Total revenue for 2022 should fall between $600 million and $630 million, according to updated estimates from RSI.

The company previously forecasted revenue as high as $650 million. The decrease leaves some room for any consumer weakness in the second half, though that has not been felt yet, Sauers said.

“We also have a large number of states that haven’t been through a full football season, which creates a lot of opportunity, but also some unknowns about how fast those markets will grow and what the competitive dynamics will look like,” Sauers added.

The updated midpoint of $615 million represents a 26% increase over 2021’s $488 million in revenue.

Profitability expected in second half of 2023

There is no change to the expectation that the entirety of RSI will be adjusted EBITDA-positive in the second half of 2023, Schwartz said.

RSI is profitable in six markets:

West Virginia turned positive in the second quarter, while the profitability of the five others combined was up compared to the first quarter.

The company reported an adjusted EBITDA loss of $18.6 million for the second quarter compared to $6.6 million last year.