Yahoo Finance Rush Street Interactive, Inc. (NYSE:RSI) Q1 2024 Earnings Call Transcript
Rush Street Interactive, Inc. (NYSE:RSI) Q1 2024 Earnings Call Transcript May 1, 2024
Rush Street Interactive, Inc. beats earnings expectations. Reported EPS is $0.03, expectations were $-0.03. Rush Street Interactive, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day to you, ladies and gentlemen, thank you for standing by. Welcome to Rush Street Interactive First Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference call is being recorded today, May 1, 2024. I will now turn the call over to Kyle Sauers, Chief Financial Officer.
Kyle Sauers: Thank you, operator, and good afternoon. By now, everyone should have access to our first-quarter 2024 earnings release that can be found under the heading financials quarterly results in the Investors section of the RSI website at rushstreetinteractive.com. Some of our comments will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not statements of historical fact and are usually identified by the use of words such as will, expect, should and other similar phrases are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We assume no responsibility for updating any forward-looking statements.
Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. In particular, we will be discussing adjusted EBITDA, which we define as net income or loss before interest, income, taxes, depreciation and amortization, share-based compensation adjustments for certain one-time or nonrecurring items, and other adjustments that are either non-cash or are not related to our underlying business performance.
A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is available in our first quarter 2024 earnings release and our investor deck, which is available in the Investors section of the RSI website at rushstreetinteractive.com. For purposes of today's call, unless noted otherwise, when discussing profitability, EBITDA or other income statement measures other than revenue, were referring to those items on a non-GAAP adjusted EBITDA basis. With me on the call today, we have Richard Schwartz, Chief Executive Officer. We will first provide some opening remarks and then open the call to questions. And with that, I'll turn the call over to Richard.
Richard Schwartz: Thanks, Kyle. Good afternoon, and welcome to our first quarter 2024 earnings call. We are pleased to report that we began 2024 with the same strong momentum with which we ended 2023. First quarter revenue was $217 million, up 34% year-over-year and EBITDA was $17 million, representing a $26 million improvement year-over-year. Both of these figures represent quarterly records by a wide margin, something our team is very proud of. We were able to achieve these milestones by continuing to focus on the quality of our product experience and the ability to efficiently acquire and retain high-value players. Said simply, we are adding players to our platform more quickly. Players on average are higher value, we are finding these new players more efficiently than ever and we are driving meaningful profitability from this impressive growth.
During the quarter, both iCasino and online sports grew over 35%, demonstrating balanced growth across our product verticals. This is a continuation of what we saw last quarter and continues to be driven by both rapidly increasing player counts and improving player values. The results of efforts to continually differentiate our user experience and offer a high-quality experience engages and retains players on our platform. In North America, we again achieved a new record in monthly active users. For the first quarter, MAU growth was 20% year-over- year. Going back to beginning of Q4 last year, we have seen our growth in North American MAUs accelerate monthly in each of the last six months. In Latin America, our MAUs continued to grow rapidly during the first quarter as we were up 72% year-over-year.
It is noteworthy that these growth in users across our markets did not come at expensive player value as we increase both North American and LATAM at MAUs in the first quarter. Next, there are a few market-specific takeaways to highlight. While we experienced growth across all market vintages, our newer markets continue to drive outsized revenue growth. In Latin America and in the US Canadian markets launched since 2021, revenue grew 78% year-over-year in Quarter one. This growth across newer markets led to our revenue contribution from markets other than Illinois and Pennsylvania to reach 57%, up from 47% during the first quarter of 2023. As a reminder, our operating margins in Pennsylvania and Illinois are lower due to the arrangements with our land-based partners in these states.
Thus, as a percentage of revenue contributed from other markets increases, our overall margin should expand, which is what we saw in Q1. Our newest market, Delaware, continued its strong early performance that we highlighted during our last earnings call. For Q1, our annual GGR run rate increased and was nearing $70 million, a $10 million increase from the $60 million level we shared on our last call, was driven by a strong end to the quarter. We ran over four times the rate of the previous operator during the month of March, with around 75% of this GGR attributed to iCasino. Similar in market proportion to other states for both iCasino and online sports betting are allowed. We achieved this level of scale with a focused marketing spend and approach, validating our belief that players appreciate our differentiated products and respond to our focus on a high-quality and trustworthy customer experience.
While on a topic of Delaware, many of you have seen that there has been a bill introduced to expand online sports betting to additional operators. We are actively involved in discussions on this topic and have support from key stakeholders in the state, leading us to feel positive on the current structure remaining in place. In the event there is a change, I'll remind you of the loving effort only applies to online sports betting. While our newer market continued to be strong growth, we also saw a resurgence from some of our more mature markets. During the quarter, our three largest online casino markets in North America: Michigan, New Jersey and Pennsylvania, each had our highest year-over-year revenue growth rates in the last two years. Our focus on the iCasino experience is resonating with new and existing customers, driving very solid growth in these existing markets.
Turning to our LatAm operations. We continue to be extremely pleased with our performance in Colombia and Mexico. Our RushBet brand is resonating with customers as evidenced by our year-over-year MAU and ARPMAU growth. This translated to year- over-year revenue increases of 84% in Latin America with a lot of room for continued growth as we invest in both these markets. In terms of marketing approach, while our strategy has not wavered, our execution continues to improve, we target the highest ROI opportunities with an emphasis on attracting the highest value players to our platform and retaining them by offering them a high- quality experience and this is working. Specifically, I'm very proud that we have continued to deliver results in driving greater efficiency in our marketing costs.
In fact, in Q1, we had our highest number of first-time depositors ever as a company and the highest in North America since our launch in New York in the first quarter of 2022. And we've been able to do this while lowering our CPAs to less than half of what they were a year ago. One of our unique strategies for acquiring customers is our BetRivers Network, which we use to engage players and keep the BetRivers brand top of mind for our players. In light of the strategy, we were excited to recently announce the renewal of our partnership with sports broadcasting legend Mike Francesa, who is a staple on our BetRivers Network. Subsequent to quarter end, we were also proud to announce our partnership as a title sponsor for the NASCAR Xfinity Series Dash 4 Cash race.
The BetRivers 200, which took place on April 27 at Dover Motor Speedway, marked the first time in Delaware history of fans to place mobile sports wagers from inside a sporting event. This historic event came on the heels of our online sports betting launch in the state and served as a unique opportunity to promote our brand, while also investing locally in Delaware and supporting an unforgettable event of the same raceway. Lastly, we furthered our commitment to returns-based marketing through the announcement of the hiring of Brian Sapp as the company's first Chief Marketing Officer. Throughout his career in the gaming and mobile industries, Brian has repeatedly led marketing teams to deliver successful brand and data-driven campaigns, that scale businesses, while achieving growth and profitability goals.
Our entire team is very excited at Brian on board. On the new markets front, we continue to be excited about a variety of opportunities opening up across the Americas. Our next likely market launch will be Peru, which we anticipate to be later this summer. We are finalizing our plans and strategy and we are very excited about this opportunity. As a reminder, Peru is about two-thirds of the population in Colombia, with a slightly higher GDP per capita. We believe we are well-positioned for success there given the market adjacencies and overlap with Colombia and established teams in Colombia we will leverage. As for other regulated markets in LatAm, we continue to evaluate a range of opportunities. The regulations for Brazil have been beginning to roll out so as they are published, we are reviewing and assessing them.
We will continue to share updates about these markets, which as noted in the past, typically include both online casino and online sports betting, playing to our demonstrated strength of multiproduct markets and Latin America. With that, I'll turn the call over to Kyle.
Kyle Sauers: Thanks, Richard. First quarter revenue was $217.4 million, up 34% year-over-year driven by strong growth of over 35% year-over- year across both our iCasino and online sports betting products. As Richard highlighted previously, our first quarter results were also strong across market vintages and geographies. We continued our trend of positive EBITDA for the fourth consecutive quarter and reached a record $17.1 million, up from negative $8.7 million during the prior year period. We were able to achieve these results due to the increased flow-through, we're able to capture as our business scales and our operations and marketing continues to optimize. As previously mentioned, our top line growth was the result of growth in both the number and value of our user base.
In North America, MAUs reached 176,000 up 20% year-over-year while ARPMAU was up 9% year-over-year to $355. Our Latin America metrics were also up, with MAUs reaching 224,000 during the quarter representing a 72% year-over-year increase and ARPMAU reaching $43, a 4% increase over the prior year period. We continue to find the right ways to efficiently bring new players onto the platform, retain them well and work hard to reactivate those that have been away for a while. We are as convinced as ever that once players find the BetRivers a Rushbet experience that will dedicate a large share of their entertainment wallets, and keep returning for years to come. For the quarter, gross profit margin increased 160 basis points sequentially to 33.7%.
As Richard highlighted, revenue from the markets other than Pennsylvania and Illinois, accounted for 57% of revenue during the first quarter, the highest percentage since we've been public and a trend that we expect to continue. As evidenced by our strong growth in MAUs and ARPMAU, we're very pleased with the impact of our marketing spend in Q1. For the quarter, advertising and promotions were $37.8 million, which is up single digits sequentially, but down 23% from the same period last year. As a percentage of revenue this equated to 17%, which is down from 30% in the first quarter of 2023. Our current thinking is that marketing spend is likely to be up sequentially in the second quarter and third quarter compared to the first quarter, with a bigger step-up in Q4.
Of course, given our success in finding cost- effective and unique ways to drive customer acquisition, we'll continue to remain flexible, with our plans. G&A for the first quarter was $18.3 million, equating to 8.4% of revenue. As highlighted in our last call, much of the run rate increase in G&A was absorbed in Q1 due to annual compensation adjustments. Going forward, we continue to believe that our full year G&A expense as a percentage of revenue, will be below 2023's 8.8% due to the leverage we experience as the business scales. We ended the quarter, with $191 million in unrestricted cash, an increase of $23 million during the quarter and we continue to have no debt. Following on our strong first quarter results, we are raising both our full year revenue and EBITDA guidance for 2024.
We now expect full year revenue to be between $810 million and $860 million, which increases the midpoint to $835 million, up $35 million from our initial guidance. We expect full year EBITDA to be between $50 million and $60 million, which increases the midpoint to $55 million, up $15 million and up 38% from our initial guidance. And as a reminder, our guidance includes only those markets that are live as of today. And with that operator, please open the lines for questions.
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