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RSI talks up full-year profitability potential after Q2 growth

| By Robert Fletcher
Rush Street Interactive (RSI) CEO Richard Schwartz has suggested the business could post a profit in the 2023 full-year after reporting growth in the second quarter and first half.

The business was adjusted EBITDA-positive in Q2, while this figure improved significantly year-on-year in H1. This, RSI said, was accompanied by revenue growth during both periods.

RSI ultimately remained at a net loss for both periods, but this was reduced considerably. As such, Schwartz said there is a possibility it could turn a full-year profit, should the market be favourable in the second half. 

“There are scenarios that would cause us to be profitable or adjusted EBITDA profitable for the full year,” Schwartz said. “We are very excited about what we achieved in the second quarter and Q3 could well be profitable as well. 

“It kind of depends on where revenue comes in. Seasonally, it wouldn’t be unusual for Q3 revenue to be flat or potentially down from Q2. We’ll see where it shakes out, particularly considering we had some good sports outcomes in the second quarter.

“If revenue comes in, perhaps, even with the second quarter, Q3 could be profitable from an EBITDA perspective. Then, if revenue is a little lower than that, maybe it starts to get a little tighter, but we remain very excited about profitability for the back half of the year.”

Positive Q2 for RSI 

Starting with Q2, revenue in the three months to 30 June was $165.1m (£127.1m/€147.8m), up 14.9% from $143.7m last year. This, RSI said, was ahead of expectations for the quarter.

The operator said it experienced growth across online casino and sports betting in US and international markets. 

Schwartz spoke of RSI’s success in Latin America in particular. Colombia revenue was 30.0% higher year-on-year, while further growth is expected in Mexico. He also spoke about the recent regulation of sports betting in Brazil as another opportunity.

In addition, Schwartz referenced regulatory progress in both Chile and Argentina, saying the business is “excited” about further growth potential in the region.

“We have ample opportunities and are evaluating and identifying the ones that make the most sense for us to enter,” Schwartz said. “We’re really excited about the region and think we have a head start over most of the sophisticated operators in the industry and a chance to really deliver some outsized results.”

Reducing net loss

Looking at costs, operating costs for the quarter were 7.8% higher at $179.4m. Lower marketing spend was offset by higher costs in other areas, with revenue expenses still the main outgoing at $109.9m.

RSI also noted $288,000 in interest income, leaving a pre-tax loss of $14.0m, compared to $26.0m last year. The business paid $2.7m in income tax, resulting in a net loss of $16.7m, again an improvement on the $28.2m loss in 2022.

However, $11.6m of this loss was attributed to non-controlling interests. As such, net loss attributable to RSI was $5.1m, down from $8.3m last year.

In terms of adjusted EBITDA, this reached a positive of $1.2m, in contrast to the $18.6m loss in 2022.

First half growth

As for the first half, revenue in the six months to 30 June reached $217.0m, up 6.0% year-on-year.

Operating expenses edged up 2.6% to $363.8m, again despite a reduction in marketing costs for the period. After accounting for $688,000 in interest income, pre-tax loss was $35.7m, an improvement on $76.3m last year.

Income tax hit $5.5m, with net loss at $41.2m, compared to $80.6m in the previous year. As $28.8m of this was attributed to non-controlling interests, net loss attributable to RSI stood at $12.4m, almost half the $23.0m loss in 2022.

In addition, adjusted EBITDA came in at a negative of $7.4m, but this was significantly better than the $62.0m loss last year.

Full-year guidance

As a result of Q2 and H1 growth, RSI slightly increased its guidance for the full year. Revenue for the 12 months to 31 December is now expected to amount to between $650.0m and $690.0m. 

This midpoint of this range is $670.0m, up $5.0m on previous estimates and 13.0% higher than $592.0m posted in FY22.

“We have built a fundamentally strong business with a firm foundation,” Schwartz said. Looking ahead, we are optimistic about our ability to innovate and continue to improve the quality of the user experience. 

“With a solid financial position, a proprietary and scalable technology platform and effective operational discipline, we are confident in our ability to continue executing successfully, positioning ourselves for further revenue and profitability growth in the future.”

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