Rush Street ramps up full-year revenue guidance as New York batters bottom line in Q1
Rush Street Interactive (RSI) has reported a year-on-year revenue rise of 21% to $134.9m in Q1 2022 despite a costly launch in the state of New York.
The operator posted a Q1 EBITDA loss of $43.4m, two thirds of which was attributable to marketing and brand-building efforts in New York, which launched regulated online sports betting on 8 January.
First quarter net losses jumped to $52.3m, compared to just $76,000 in the same period of last year.
RSI said Q1 EBITDA losses would have been closer to $15m were it not for New York.
The Empire State was also responsible for a near $6m hit to the revenue bottom line, although CFO Kyle Sauers expects marketing costs to reduce significantly into Q2 following the conclusion of the NBA and NHL seasons.
Q1 marketing costs shot up by 58% annually for RSI to $66.8m as the business invested in new market launches, mostly in New York, Louisiana and Ontario.
“We expect marketing expense in New York to reduce significantly in the second quarter and going forward, but we’ll also have increased costs in the second quarter in Ontario related to our exciting recent launch, a market where we’re optimistic we’ll see solid returns given that online casino is legal in this market,” added Sauers.
RSI CEO Richard Schwartz said the company was “generally disciplined and prudent” in its initial promotions and marketing spend, estimating it bonused at 35% less than its largest competitors during full-year 2021.
“We believe firmly that players will come to, and more importantly, stay with the brands like ours that they enjoy and trust and bonus them in a fair and consistent way,” said Schwartz.
“We don’t believe loyalty is achieved by bonusing heavily for early action and then pulling back on that bonusing down the road,” he added.
The RSI management team told investors on the Q1 analyst call that it hoped EBITDA profitability would be achieved in H2 2023.
The operator already reported profitability in Michigan for Q1 during its fourth full quarter of operation in the state. This was aided by the fact online casino is legal in Michigan. A key strategic pillar for RSI is to achieve profitability quickly in states that offer both regulated online sports betting and iGaming.
The business currently operators real-money gaming in 15 markets, including six for online casino and 14 with online sports betting. This equates to being live with approximately 31% of the US population for OSB, but only 10% for iGaming.
Rush Street Interactive CEO Richard Schwartz: “We don’t believe loyalty is achieved by bonusing heavily for early action and then pulling back on that bonusing down the road.”
“That means even with all the growth that we’ve seen, there is still plenty of growth opportunity in front of us,” said Schwartz on the Q1 webcast.
“In particular, the opportunity for continued growth in online casino is tremendous – especially since we deliver a top-quality user experience with strong differentiation, have demonstrated larger profitability and achieved it more quickly.”
Schwartz said RSI occupied a current market share in terms of handle of 10% for online casino and just below 5% for online sports betting.
Q1 was RSI’s eleventh consecutive quarter of sequential growth. It ended the reporting period with $232m in unrestricted cash on hand and no debt.
As a result, the operator has increased full-year 2022 revenue guidance to between $600m and $650m, up from previous forecasts of between $580m and $630m.
This would represent annual full-year growth of 28% at the midpoint range of $625m, although it does not account for the cost of new state launches.