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RSI reduces full-year revenue guidance despite Q3 growth


Rush Street Interactive (RSI) lowered full-year revenue guidance for its 2022 financial year despite having reported growth during the third quarter.

The operator said the reduction reflected a lower-than-normal online casino hold in Q3, as well as foreign exchange headwinds in the quarter, particularly in Canada and Colombia,

RSI also noted the impact of more “disciplined” marketing spend. This was relatively level year-on-year at $45.2m, but the operator said it will continue a more “efficient” approach to costs in this area.

“Our approach to marketing remains data driven as we are investing in customers at what we believe to be viable levels,” RSI chief executive Richard Schwartz said in an earnings call after the Q3 results were posted. “In other words, we look hard at what we spend and what we get.

“We won’t target market share. Rather, we continue to focus on earning and retaining customer loyalty by treating them well, being thoughtful, developing seamless experiences, and reducing friction at every possible interaction point.

“Our marketing efficiency continues to improve, validated by our cost per player in Q3 being down by over 50% from the same quarter last year.”

However, Schwartz said this more disciplined approach to marketing will not slow down RSI’s expansion strategy, with the operator eying up launches in a number of US states in the near future.

Plans are in place to go live online in Ohio in January, as well as roll out sports wagering in Maryland. Schwartz also talked up the prospect of igaming being legalized in Iowa, Indiana and Illinois, as well as in New York, saying that RSI is keen to launch in these markets when legislation allows.

“With that focus and funding and alignment, I think it’s very possible that you will start to see some movement in legalization efforts in the states that I mentioned, perhaps others,” Schwartz said.

Looking at the third quarter results in full, revenue for the three months to September 30 was $148.0m, an increase of 20.4% from $122.9m in the corresponding period last year and a record total for the 14th consecutive quarter.

However, despite the drive to become more efficient with marketing spend, operating costs and expenses were up 19.9% to $168.6m. Incidentally, marketing was the only area where spend was down, with revenue costs, general administration spend and depreciation and amortization all rising year-on-year.

After accounting for an additional $219,000 in interest expenses, this left a pre-tax loss of $20.8m for the quarter, compared to $17.7m at the same point in 2021. RSI paid $1.8m in income tax, resulting in a net loss of $22.7m, wider than $18.9m last year.

However, RSI did note that $16.0m of this net loss was attributed to non-controlling assets, meaning net loss attributable to RSI as $6.6m, which was still more than $5.3m in 2021.

In addition, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) came in at a loss of $12.5m, wider than the $12.2m posted in Q3 last year.

As a result of the Q3 financials, as well as the effects of currency fluctuations impacting international revenue, RSI adjusted its full-year revenue guidance to between $580.0m and $600.0m. This was down from a range of $600.0m to $630.0m, but the midpoint of the new range would still represent a 25.0% year-on-year increase for the operator.

“Despite a lower-than-normal online casino hold rate and currency headwinds during the quarter, which we believe collectively impacted our quarterly revenue by an estimated $6.0m, we generated record revenues for the 14th straight quarter and progressed towards our profitability goals and our target of being adjusted EBITDA positive for the second half of 2023,” Schwartz said.

“In terms of activity, we continue to see very strong volumes in markets where we operate both online casino and sports betting, as we are able to execute on the enhanced profitability offered by the online casino vertical in these markets. Internationally, we are seeing strong results from both Colombia and Ontario and we are excited to begin increasing marketing efforts in Mexico.

“We remain focused on building a strong foundation in our new markets that will provide stable, long-term growth opportunities while keeping an eye on future profitability.”