Rush Street Interactive becomes latest US sportsbook targeting profitable quarter in 2023

Rush Street Interactive expects to achieve positive adjusted EBITDA for the second half of 2023, becoming the latest publicly traded online gaming operator to announce a profitability timeline.

Topline numbers

During its fourth-quarter 2022 earnings report, RSI reported $165m in revenue for the quarter, a 27% increase compared to the fourth quarter of 2021. The company’s Q4 2022 net loss was ($31.1m) an improvement from the ($38.1m) in net losses it saw in Q4 2021.

RSI’s adjusted EBITDA was a loss of ($17.3m) in Q4 2022, improving from ($31.2m) in losses from the same quarter a year earlier.

The company’s adjusted advertising and promotional expenses were $63.2m in Q4 2022, virtually unchanged from Q4 2021.

Rush Street reported a 22% year-over-year increase in real-money monthly active users in the US and Canada between the fourth quarter of 2022 and 2021.

For calendar year 2022, RSI generated $592.2m in revenue, a 21% increase from 2021. Its net loss was ($143.m) in 2022, more than double the ($71.1m) in losses incurred during the year prior.

Adjusted EBITDA losses also increased year-over-year, growing from ($65.1m) in 2021 to ($98.1m) in 2022. Part of this was from an increase in yearly promotional spend, which increased to $218.4m from $186.9m.

News nugget

Rush Street Interactive expects to achieve positive adjusted EBITDA for the second half of 2023, a major milestone for the company and the latest sign US gaming operators are pivoting toward profitability. The company reported 95% annual growth in markets in North America as well as Latin America, where it is a leader in both the Mexican and Colombian markets.

The company joins Caesars, BetMGM and Penn Entertainment among companies that expect to achieve positive adjusted EBITDA returns this year after each company spent hundreds of millions of dollars on marketing, promotions and other free bets in the year prior.

US handle leader FanDuel was the first major US online gaming company to achieve a profitable quarter and expects full-year profitability in 2023. DraftKings, the No. 2 operator, expects to do the same in 2024.

RSI has significantly less market share than US market leaders such as FanDuel and DraftKings but it also has incurred far fewer financial losses. CEO Richard Schwartz said his company’s “disciplined operating philosophy” will ultimately pay off with projections for its first-ever quarter in the black later this year.

Best quote

Rush Street Interactive CEO Richard Schwartz: “I think we’ll remain flexible on how we invest in marketing but I think we’ve proven that we’ve been modest with our investments and achieved a lot while doing so.”

Best question

Rush Street officials were bullish on the nation’s online casino gaming future – and its role in that ecosystem.

When asked during Wednesday’s Q4 earnings call about any changes to the US regulatory environment, Schwartz said he was encouraged by the work in statehouses across the country. Though only five states have introduced bills to legalize real money online slots or table games, the Rush Street CEO said he could see political interest growing.

“I think you’re starting to really get momentum being built, which of course, is outstanding for us, because of all the companies and industry, we think we may be one of the ones that have a disproportionately large share of casino revenues,” Schwartz said. “And we do particularly well in the casino markets.”

Online casino gaming is essential to US gaming operators’ long-term investments. Major companies have been willing to burn hundreds of millions in player acquisition costs for sports bettors in large part in the hopes they will become players of online casino games, which have significantly higher profit margins.

However, only four states – New Jersey, Pennsylvania, Michigan and West Virginia – have fully competitive online casino gaming markets. Of the five states that have introduced bills, it appears only New Hampshire has a strong chance of passing one this year.

Still, long-term iCasino legalization could be especially promising for RSI, company officials reaffirmed Wednesday.

Two of the states seriously considering iGaming are Illinois and New York. Rush Street is headquartered in Chicago and has long had a strong brick-and-mortar presence in Illinois. The company is also one of only three operators to offer online sportsbooks in New York, Connecticut and New Jersey.

Current trading and outlook

Rush Street expects full year 2023 revenues to be between $630m and $700m, according to the company’s Q4 2022 report. Reaching the midpoint range of $665m in revenue would represent a 12% year-over-year increase.

The company laid out its target based on no new state launches as well as the continued operations of all markets in which it operates currently. States including Texas, Georgia, Minnesota and Missouri are considering sports betting legislation but no jurisdictions have passed a legalization measure so far this year.

Rush Street’s BetRivers sportsbook started taking bets in Ohio in January. It had roughly 0.1% revenue market share in January, which was 13th place of the 16 books taking bets.

RSI stock was down as much as 10% during trading early Thursday. The company’s stock is up more than 11% in the past three months but down more than 60% in the past year.