Rush Street Interactive, Inc. (RSI) Q4 2024 Earnings Call Transcript

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Rush Street Interact fourth quarter and year-end 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference call is being recorded today, February 26, 2025. I will now turn the call over to Kyle Sowers, the financial officer. May proceed.

Thank you, Operator, and good afternoon. By now, everyone should have access to our fourth quarter and year-end 2024 earnings release. It can be found under the heading Financials Quarterly Results in the Investor 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 or other similar phrases and 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 non-recurring items and other adjustments that are either non-cash or 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 fourth quarter in year-end 2024 earnings release and our investor deck, which is available in the investor 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, we're 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. Thanks, Kyle.

Good afternoon, and welcome to our fourth quarter 2024 earnings call. I'd like to begin by expressing my gratitude to the entire RSI team for their outstanding efforts. Their dedication and hard work have been instrumental in our success. I couldn't be more proud of the incredible team we've built over the years. Your dedication is a key reason we excel in such a competitive industry. As I reflect on our performance in 2024, this has undoubtedly been our best year ever. we not only set records in revenue profitability cash flow margins user accounts and many other key kpis but we also made significant advancements in our technology platform strategic initiatives and customer-centric experiences demonstrating an ability to execute while scaling effectively most importantly we believe we have positioned ourselves for success in the years ahead We concluded the year with a record-setting quarter in both revenue and adjusted EBITDA, exceeding the high end of our most recent guidance. For the year, we grew revenue 34%. While this top-line growth was impressive, what stands out was our ability to drive 36% of that growth to the bottom line. We expanded gross margin by over 200 basis points, reduced marketing expense compared to last year, and gained leverage over our G&A costs. As a result, we saw an 11 times increase in adjusted EBITDA for the year. Our long-term focus and expertise in creating differentiated and high-quality user experiences are paying off. We have simultaneously achieved our growth and profitability targets across our entire portfolio, while increasing contributions from all geographies, both iCasino and sports, and from both our newer and more mature markets. As we take stock of our progress, our focus on three key principles has positioned us for long-term success. First, our customer-centric approach prioritizes a world-class user experience. This is easier said than done. It requires a clear vision, in-house technology, innovative product teams, seasoned operations teams, and deep user insights. Our players notice and appreciate how we take care of them. from exceptional customer service and reducing friction in their journey to our unique real-time reward system. This proprietary system delights our players in unexpected ways, including offering extra chances to win through fun and engaging in-house developed content that delivers secondary gaming experiences not available elsewhere. Second, our continuous investment in in-house technology supports diverse and innovative product features. These new features often require a deep understanding of our users and sophisticated development. Our commitment to technology will ensure we stay ahead of the curve. Third, as evident in our results, we leverage operational efficiency to scale and enhance margins. This approach has driven our recent strong results and underscores our commitment to becoming a leader in online gaming across the Americas. Regarding the quarterly results, as investors evaluate our performance, there are a few takeaways worth pointing out. As referenced earlier, we've experienced broad-based growth. Top-line performance was strong once again, with strength across products. Both online casino and online sportsbook each grew over 27%. We are also continuing to experience strength across geographies. North America Online grew 29%, while LATAM grew 54%. This growth was in the face of player-favorable NFL outcomes in the Q4, reinforcing the consistency and diversification of our revenue streams. Underlying these results are strong trends in both player accounts and player values. For the fourth quarter, North American MALs were at an all-time company record of $205,000, up 28% year-over-year, marking another consecutive quarter of accelerating growth. ART MAL in North America increased to $346. The fast growth in players, while maintaining our leading ART MAL level, is a true testament to our underlying strategic focus on user engagement and retention. In Latin America, we continued to experience high levels of growth, with our mouths increasing year-over-year by 71% to 348,000. This increase highlights the effectiveness of our localized strategies and teams, and our ability to attract and retain users. Our ArtMao in the region was $39. When measured in local currency, this increased both sequentially and year-over-year. Our marketing efforts continue to yield positive results, building on the strong foundation laid in previous quarters. Our Mao and ArtMao trends are being driven by our targeted and data-driven marketing efforts. Our campaigns have effectively leveraged a mix of traditional and digital channels allowing us to reach a broad audience and attract new users at a very solid pace while we've made tremendous improvements in our marketing efficiency over the past couple of years we continue to improve and find new strategies to maximize effectiveness overall spend continues to deliver strong results as evidenced by our continued momentum in mouths and art mouths. We are closely monitoring the 2025 legislative sessions in several US states and Canadian provinces for potential online casino legalization and expansion opportunities. We cannot predict specific outcomes, but there is a growing recognition that online casino gambling is already happening in these places and across the United States and Canada through offshore, unregulated, and unlicensed sites, including online sweepstakes casinos that offer real-money games that look and feel exactly like regulated sites, but pay no taxes and lack player safeguards and protections. Regulation is a proven way to protect players and generate significant tax dollars to fund critical government budget initiatives like education, healthcare, and other important programs. We remain dedicated to delivering value to our shareholders and providing an unparalleled gaming experience to our users. The success we experienced in 2024 sets a strong foundation and we are optimistic about maintaining our strong momentum into 2025. Our focus will remain on delivering consistent performance and driving value for our shareholders. With that, I'll turn the call over to Kyle.

Thanks, Richard. Fourth quarter revenue was $254.2 million, up 31% year-over-year, leading to full-year 2024 revenue of $924.1 million, up 34% year-over-year. Our growth in the quarter in the full year was well-balanced across both iCasino and sports and also across geographies. In the fourth quarter, gross profit margin increased to 36.5%. We continued the improvement in our revenue diversity and drove higher revenue growth in our more profitable markets. For the full year, gross profit margin was ahead of plan at 35.0%, an improvement of over 200 basis points versus the prior year. We achieved sequential improvement in gross margin in each quarter throughout the year. For 2025, we expect our gross margins to continue to improve as the revenue mix continues to improve and we execute on cost improvement. On the marketing side, we continue to stay disciplined and refine our spend. We are spending more in markets where we see better opportunity for turns and we will continue to be flexible with those investments. In fact, in Q4, we increased marketing spend once again and had our highest spend in the last seven quarters while importantly still achieving leverage over our marketing spend and delivering another record even a quarter fourth quarter marketing spend was 43.1 million or 17 percent of revenue compared to 17.8 percent of revenue last year for the full year adjusted advertising and promotion spend was 155.8 million down from 158.4 million last year we see the efficiencies evident in our growing active user count and getting a larger share of wallet from our players measured by increasing our file looking ahead to 2025 we expect you'll see continued discipline from our marketing efforts and while we won't be shy about making investments when we see the opportunities we do expect to get incremental leverage over our marketing spend again in 2025 so marketing spend that grows at a lower rate than revenue for the year gna for the fourth quarter was $19 million, or 7.5% of revenue, compared to 8.4% last year. And then for the full year was $74.8 million, or 8.1% of revenue, which compares to 8.8% last year. For 2025, we expect to get some modest leverage over our G&A expense and come in less than 8.1%. Similar to years past, much of the The run rate increase in G&A will come in the first quarter as we have our annual compensation adjustments for employees. Our adjusted EBITDA for the fourth quarter was $30.6 million, reflecting a significant increase of over two and a half times compared to the prior year. For the full year, adjusted EBITDA of $92.5 million increased more than 11-fold compared to the prior year. In 2024, we made a tremendous leap in obtaining benefits from the increasing scale in our business we were also able to demonstrate a strong flow through from earnings to cash flow highlighting what we see as a very high quality of earnings we ended the year with 229 million in unrestricted cash and no debt an increase of approximately 61 million for the year during the fourth quarter we did not buy back any shares under our repurchase authorization We are initiating full-year revenue and adjusted EBITDA guidance for 2025. We currently expect revenue to be between $1.01 and $1.08 billion, which represents $1.045 billion at the midpoint, up 13% year-over-year. For the full year 2025, we currently expect adjusted EBITDA to be between $115 million and $135 million, which represents $125 million at the midpoint, up 35% year-over-year. Our guidance ranges for revenue and EBITDA include a range of potential business impacts from the recent tax changes in Colombia, with the assumption that the tax lasts through the end of the year. As you saw in our 8K from last week, the Colombian president has issued an emergency decree to, among other things, levy a tax on players for deposits made into online betting accounts. There is currently a review of the constitutionality of this decree, the applicability of the tax, and the temporary time frame over which it can be administered. including the court's automatic review that is expected during the next few months we anticipate several strong legal challenges on constitutionality if the tax were to be repealed or shortened we would expect to see upside to our guidance ranges in addition to the columbian tax other considerations that help bridge the difference between the low and high ends of our revenue and evita guidance include the growth of the markets that we are in our ranges of continued success in attracting new and monetizing existing players, our varying levels of marketing investment, and potential currency movements in our non-U.S. markets. And as a reminder, our guidance includes only those markets that are live as of today. With that operator, please open the lines for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question please press star followed by one on your telephone keypad if for any reason you would like to remove that question please press star followed by two again to ask a question press star one and as a reminder if you are using a speakerphone please remember to pick up your handset before asking a question and we will pause here briefly as questions are registered the first question is from the line of Dan Ollitzer with Wells Fargo. You may proceed.

Hey, good afternoon, everyone. Thanks for taking my question. First, just to follow up on the guidance, Kyle, you mentioned that it does include Columbia. Is there any way to quantify that, what's being baked in right now? And then separately, along the same line, as you think about that kind of midpoint of 13% revenue growth for 2025, Is there any way that you could kind of further unpack that between Latin America and U.S. or even, you know, within the U.S. iGaming and how you think about the growth for 25?

Sure. So I'll start with the Columbia piece just to make sure it's absolutely clear that both the high and low end of our ranges for revenue and EBITDA include the impact of the VAT, assuming that it's in place through the end of the year. So we want to make sure that that's clear, that if the tax were to be reversed or shortened, that that provides upside to both the bottom end and the top end of our guidance. When you think about what we've included for Columbia, listen, we're only a few days into this, so we're learning as we go here what the impact might be, and it'll take a while to have all that flesh out. But, you know, at the low end of the guidance, I'd assume that's a pretty bad outcome for Columbia for the year and how it's played out. And at the high end of the guidance, it's more around things turning out pretty well there, given the circumstances. And then when thinking about, you know, the other 85 plus percent of the business on the revenue side, you know, we're expecting growth in almost all of our markets. is certainly an expectation that much more of our absolute growth is coming from markets that include iCasino. As you know, that's where we've been putting more of our investment dollars from marketing. It's where we see higher player values, where we offer really great differentiation in the product and obviously continuing to have a lot of success in Q4 and so far here in the start of you want.

Got it. That's helpful. And then just for my follow-up, obviously, it's been a pretty heavy headline cycle in terms of taxes and proposed increases for sports betting and iGaming. I guess, is your guy faking in anything along those lines? And I guess more broadly, how do you think about that risk across the myriad of states that have proposed something in some form versus maybe the upside risk of a path of legalization for high damming in some of these states?

Yeah, so I'll hit the guidance piece. So we have not, outside of Colombia, where we've assumed it for the full year, the VAT deposit tax, we've not included other scenarios of tax changes in other markets that we're in. So just like we do not have included in our guidance New markets that might go live sometime later this year. We're also not including any proposed legislation around taxes, you know, to the extent something were to be approved and legislated, you know, in the future, then we'd, of course, consider that for the future guidance. But the guidance we have right now does not include any any tax changes. And then I'll let I'll let Richard just comment on the on the landscape.

Sure. Hey, Dan. You know, on the subject of tax increases, there's no doubt a substantial tax increase is a near-term setback. But we view it as a clear display of the need for states to raise taxes. And while states are looking at online gaming industry to raise funds, it cuts both ways. And in some ways, including on a net-net basis, we believe it's actually really beneficial for our industry and for us especially if it accelerates expansion of opportunities. And so we know that the legalization online casino is one of the most attractive and proven options to raise funds. And let's not forget that 88% of the U.S. adult population can't play regulated online casino today. It's a large population available for us to sort of be able to work towards legalization efforts. So while in the near term you might have a couple hiccups, ultimately we think that the net is positive for us as you start to see the needs for the states accelerate the revenue generation and and online gaming can represent a very substantial way for them to achieve their goals thanks makes sense thanks so much for all the detail thanks dan the next question is from the line of ryan sigdahl with craig hallam capital you may proceed hey good afternoon guys uh really nice results um I want to stay on Columbia for a minute.

So I know it's early. I know it's the first few days. It looks like at least one of your competitors is passing on the cost directly to the consumer to not a lot of fanfare there. Many others are straight out absorbing the cost. Rush bet appears to be somewhere in the middle, kind of passing along, but offering a VAT bonus to the consumer.

I guess thoughts on how you think this is working thus far in the first couple of days. from retention standpoint competitive standpoint and then if you're willing to kind of how much of that cost you think you can mitigate with the strategy sure why don't I start it maybe you can add on the mitigation element Kyle yeah I mean competitors are all trying to determine like we are how to manage this most effectively there's different levels of approaches and sophistications vary I feel really good about our situation and the positiveness because of our technology and the fact that we can do a lot of things with our platform that aren't very common to be able to do from others in terms of segmentations to ensure the proper players are getting the bonusing so i think we have our the ownership of our own platform provides us with the ability to really be nimble and smart when our especially with our bonusing strategies i think we've already seen some operators start with one approach and change their approach pretty drastically and what we're doing is really staying the course and modifying and tweaking and monitoring situations to ensure that we're always looking out for the players the matter most for our business so i think it's it is really early hard to really get into too much more detail because it's so dynamic and fluid but i will say that i'm confident we're the best team in the industry down there and a very top quality platform for the market which should allow us to manage through this better than our competitors yeah maybe just on the on the mitigation um right as you point out it's it's super early um things are holding up well uh down

there um there's things we we've already done immediately you you mentioned some of the different uh uh kind of competitive responses to this so you're right we're modifying the way that we're handling promotions we we and the rest of the industry you know have the ability to reduce marketing spend and and we're doing some of that um and and then we look to our vendor partners to help share sharing the impact and we've got a lot of costs that are uh you know variable with revenue and as richard pointed out i think we've got we feel like we've got some advantages because of owning our own platform, our proprietary bonusing engine, and probably allows us to do some things differently than our competitors to excite and retain those players, and we're well capitalized. We've got a really strong player-friendly brand down there, so we're optimistic. It'll turn out better than it could, and things are holding up pretty well so far?

For my second question, just want to move over to Delaware specifically. So really impressive results, basically grew almost every month sequentially up, up triple digits, et cetera, all the way through January of last month. So I guess as you think about that market, it's continuing to outperform.

Is 2025 the year of let's continue to lean in and invest in that market or is it the year where you can start to to really drive margin even better thanks yeah so you're right it's uh i think the data came out for january not too long ago we've continued to have really strong sequential growth as you point out almost almost month after month uh like clockwork um and so we're very very very proud of that uh you know we reached a ggr run rate over over 125 million in the fourth quarter so um and then accrue again in january so we've got a lot of opportunity still there and and I think from a from a margin perspective I think our margins are more fixed there from an operating perspective not completely but fairly fixed so it's gonna be more about driving new players and player monetization which we think there's a lot of room left to grow there obviously our growth rate in the early part of the year from Delaware is going to be more significant than it's likely to be later in the year, just given the launch date right at the end of 2023. But a lot of opportunities still left there.

Very good. Thanks, guys. Good luck.

Thanks, Ryan. Next question. It's from the line of David Katz with Jeffries. You may proceed.

Evening. Thanks for taking my question. I wanted to just raised the issue of you know sweepstakes you know getting a lot of discussion at least among us you know curious what your perspectives on it are what you know what it can lead to what you know impacts it's having and you know any thoughts to that end i think would be welcome and helpful thanks yeah sure hey david um yeah i mean i referenced a little bit on this earlier but But at the end of the day, you have a product that is online casino that looks and feels and plays like a regulated online casino product that is not regulated, not taxed, not protected

and dominant in the markets around the country right now because there's a free-for-all and a proliferation of a Wild West mentality that I think ultimately it is surprising when you get to some of the land-based casinos opposing online casino, regulated online casino, you You don't hear what efforts are being put into stopping the sort of unlicensed activity that's proliferating in their states today. So absolutely, it is having an impact, despite what everyone can come up with research that tries to make any point they want, but ultimately, you know, it is a product that is trying to circumvent the gaming laws, the gambling laws on a state-by-state level, and I certainly think there should be enforcement uh to ensure that there's an even playing field for all all participants and to ensure that uh all online casino gameplay is being regulated taxed and and properly protected a lot of miners especially that are playing on many of those products and i think it's in the industry's interest to ensure that gets enforced and to be brought brought into proper regulatory frameworks and ultimately this existence of this activity is a really great

accelerator in addition to the tax needs of the states to legalize online casino because online gaming is online casino game is already existing so might as well tax it to protect consumers so i think there's really winning arguments in favor of accelerating i casino legislation to address this current issue that exists thanks for that and i wanted to just follow up on the sports betting side you know we spend a ton of time talking about sort of product mix and different kinds of bet offerings etc and their abilities to drive margins um you know i'd love your updated thoughts on you know things such as in play betting and and just general commentary around your product mix and that's it for me thanks sure i mean in play betting is

certainly a always known to be a important category of sports betting you see in european markets what every year for for almost a decade or two you've seen improvements increases in volume and frequency of in-game betting. So certainly for us, we've invested in that from the very beginning, and a lot of the sports that are very fast-paced that appeal really well to in-game betting like soccer and tennis, we've really achieved some strong results in. In fact, we have some podcasts in that area that really drive a lot of line with traffic and interest in that category, and we've really targeted that audience, knowing that some of our competitors have focused more on historically on that daily fantasy didn't really have the same sophistication in terms of built up audience in the tennis and soccer category. So we did focus and have focused on that. I think product mix is critical, but player profs are also very popular. And as you've also seen from us and the rest of the industry, seeming in parlays have shown they have some staying power and we put a lot of effort into proving our experience for our players in that area. But a lot of these innovative promotional tools that we have built that are unique to the industry that I referenced earlier as not being available to play anywhere else are really making a difference for us so we're continuing to invest in those types of experiences knowing that at the end of the day the players realize when you're doing something unique and different for them and they like something you're doing that isn't available anywhere else they're going to stay loyal with you and that's what helps drive our player counts and player values thanks very much appreciate it thanks dave next question is from the line of bernie mcturnan with meet him and co You may proceed.

Bernie, your line may be muted. The next question is from the line of Jed Kelly with Oppenheimer. You may proceed.

Hey, great. Thanks for taking my question. I guess, you know, just kind of circling about back to New Jersey. And say they do raise taxes, you know, typically with Internet companies, when there's a period of, like, tighter regulation or higher taxes, you generally see the larger players lean in and market more. So just given where your market position is in New Jersey, how would we expect under a higher tax scenario you to operate? And would you not want to lean back on marketing? And then just the point on future iGaming, iCasino regulation, it's been a while since we have seen states start to legalize.

I mean, can you see any catalysts or anything? you know we get the budgets deficits and needing revenue but you know is there anything that's kind of why the by the pace has been so slow over the past two years thanks yeah maybe I'll take the New Jersey piece first I think it's it's it's probably too early I mean we we obviously have a really strong brand in that area of the country we've built a really solid customer base we're well capitalized, we have to evaluate the situation and look at what's happening within competition. I don't think this level of tax that's being talked about means you've got to dramatically change the way that you're marketing, but you would need to mitigate some of that.

So I think it's probably too early for us to say what we do from a competitive standpoint there. and I'll let Richard talk about the kind of the iCasino legislation yeah sure there's more efforts going into this than ever before if you just listen to the earnings calls from our competitors this week and previously in the prior weeks you'll see that everyone's focused on it which is a tremendous difference or was a couple years ago where you didn't hear anything about efforts to legalize iCasino is really all about sports cutting as the profits from like casino have improved and the tax and the tax base increased you're starting to see a lot more focused on this category and so with that you get alignment groups that are focusing on aligning together in the organization in the industry to achieve a result of improving legalization and more markets but as i said a few minutes ago this exists the fact that online casino is already happening in every state in the u.s and it's not being taxed or regulated or not protecting consumers is a really strong accelerant that helps us to sort of make that point why you might as well protect consumers and tax it. I think the fact that you have some improvements happening in efforts in Alberta are making progress, I think there'll be some very much legislative session. It's expected to sort of show some progress here and I think there's some positive developments are happening even this week. So we're looking forward to Alberta moving forward, but you're starting to see the states, you know, you start to see the cracks in the state budgets where as a federal government is less willing to perhaps fund the states to level in the past, states are looking for additional ways to generate income and taxes. And as I said, iCasino is a incredible way for them to achieve that result. And especially for the states that are it as force-bending legalized, regulated. It's a very simple add-on. So I think you're going to see a lot more movement in this area, perhaps, than you have in the last year or two based on those factors.

Great. That's helpful. And you think that message is starting to resonate with the governors?

I think it's starting to more really now. You're starting to see the pressure. In fact, the pressure, as I said earlier, for states to start to look for gaming to increase the taxes from our industry is sort of the signs that other states and governors are also looking for ways to increase revenues and this is an easy way to do it so i do think that message is starting to percolate and i think the need is is for state revenues to increase is is is more than it has been in the past years great thank you and nice job thanks jesus the next question is from the line of chad baynen with Macquarie, you may proceed.

Good afternoon. Thanks for taking my question. Richard, Kyle, wanted to ask about M&A opportunities and buybacks. So given the cash that you have at the end of the quarter and the outlook for 25, this will obviously continue to build. Can you kind of help us think about maybe the magnitude of buyback opportunities? And if you're not participating there, is it because you're in the market looking for tuck-in acquisitions on the M&A side?

Kyle, why don't you take the buyback, then I'll take the M&A part of it.

Appreciate the question, Chad. I wouldn't – I think we're comfortable with our cash position. You're right. That cash position should continue to build nicely. I wouldn't correlate our activity executing on our buyback with some indication about M&A activity and the timing of that. I think those are, while they ultimately can impact each other, I wouldn't necessarily go to that direct correlation. So, you know, we didn't buy back any stock in the fourth quarter after our authorization. We are going to continue to be opportunistic. you know we'll continue to monitor the situation I think you know despite the near-term headwinds here from this temporary tax in Columbia and obviously came out with what we felt like was was strong guidance and in particular in the face of that we're very confident in the business trends throughout throughout the business and you know we're intent on driving shareholder value so some of that could include returning capital in the form of share buybacks now let Richard talk about M&A landscape yeah I mean we're actively assessing and considering options all the time it's what you have to do in our business and we have a very clear focus on sort of line of sight that we have a you know

profitable business in our company we have opportunities to prove it in Latin America potentially we're looking at options both on opportunities anything can add value for the shareholders um ultimately having a you know 229 million now of unrestricted cash and um growing our cash flow great balance sheet gives us a lot of flexibility a lot of options and our only focus is on what can we do to invest this capital to deliver the best return for our shareholders so we do consider all the mna options and we have an active team that's always considering different variations and possible thank you both um and then on the the

guidance not sure if you guys build top down or bottoms up but as we think about the sports betting hold improvements um getting the product features that continue to drive higher hold is there a um is there an expected sports betting hold increase that's implied in your guidance for 25? Or are you not building it that way and you're simply, you know, looking at the MAUs and kind of driving, you know, a certain amount of revenue out of those customers? Thank you.

Sure. Thanks. So it's a combination of those. And obviously, given that we plan in our guidance for a lot of different scenarios. It does include both those. I'll say that we improved sports hold in 24. We actually improved our sports hold in Q4 of this year compared to the prior year, despite the NFL outcomes that we all dealt with. We improved it as a company in North America and in in latin america so we're pretty pleased with that um there have been a lot of product improvements um and and mix improvements so we are expecting additional hold improvement uh in 25 versus 24. thanks kyle nice quarter guys thanks chad the next question is from the line of jordan bender with citizens you may proceed afternoon everyone maybe they just follow up on the on the outlook Look, you know, the implied flow through for the year in 25 is below what you saw in 24.

And from what I understand, Columbia is a pretty variable business model, so that shouldn't hurt too much to the downside. So is there anything to call out in terms of why that's the case? And, you know, is it kind of just conservatism baked into the guidance?

Yeah, thanks, Jordan. So it's a good point. You know, the midpoint of our guide this year flow through is around 27%, and that compares to what was 36% last year. And so just maybe to think about last year, 2024 benefited from an actual absolute dollar decrease in marketing spend compared to 2023. And we reduced marketing nicely, but still drove that 34% revenue growth. In 2025, we have plans to increase marketing spend. We still plan to get leverage over the marketing line, but that difference is the primary driver of the flow through between 2024 and 2025.

And then a lot of the outlooks from your competitors include commentary around promotions continuing to come down. So as we see the competitive environment continue to ease around you, are you looking to any states that you're not currently operational as the competitive environment lessens ahead of you.

Jordan, is your question states that we have not entered from a sportsbook-only perspective in the past, and are we reconsidering those? Is that the gist of the question?

Yeah.

As a competitive environment in the OSB-only states you're not in starts to ease does it make it any more attractive for you guys to go operate there yeah so you know we have these parameters that we look at for every jurisdiction and you know the tax rate the cost of entry will i-gaming be in the future likely to be in the future added and so those are things that we've looked at in the past i think looking at a competitive landscape you start to see that even though you might have a diminished number of competitors in some of these jurisdictions the ones that are actually carrying all the financial results are still in these markets and continue to invest. So I think that, you know, there are, we always look at markets, we haven't gotten to decide whether we want to go into them. But there isn't something that unless we see an outlook change where we think I casino is going to be accelerated in that jurisdiction, or there's an opportunity, I don't think it's going to raise the level opportunity that we have in front of us, because we have so many other great opportunities ahead of us, we can't get to them all, including all the Latin American markets that we have opportunities in. So we're not going to just sort of chase a sports market coming in late where we don't really see a strategic value longer term for us outside of the sports betting business.

Great, thank you very much.

Thanks, George. The next question is from the line of Joe Stoff with Susquehanna. You may proceed.

Thank you. Hi there, Richard. On the North American growth outlook in 25, I was curious about how you think about growth versus the growth in ArtMal. Is it fair to assume that, you know, you would think that ArtMal is going to grow faster than user growth? And then I was wondering if you can comment, you know, just on the level of penetration, so to speak, within iCasino. It's a pretty finite market right now. You know, you guys have been operating and really doing well in all those states. And I'm wondering, you know, is the opportunity set and to expand the penetration rate of adults that really choose to, you know, use iCasino, where are we kind of in that continuum?

Yeah, so I can start. I think on the Mao versus Art Mao and where is the growth coming from. I'd expect that it's going to be a nice combination of both. I mean, if you look at our player counts 2024, I mean, just this last quarter, we grew North America by 28 percent, and that was the highest quarter for the year. Now, we've benefited from Delaware in those numbers throughout the year, but even without Delaware, we would have had accelerating and sequential user counts for, geez, almost the last two years. So even ex-Delaware, we've had really good user count growth. And more of that has been in iCasino markets than sports markets. So some of it, some of that player value, and whether it's our mild growth or mild growth, it's going to come down to, are we bringing in more casino players than sports players, who are generally more, or the casino players being more valuable. So I think there's an opportunity for both of those to be driving the revenue growth and be a nice balance there. I guess I could jump in on the maturity of the markets.

You know, every state has a varying level of maturity. Of course, New Jersey was the first to do iCasino, and for us, Delaware's been the most recent one. So what you've seen in the European markets, and I grew up in the European markets years ago, is that you have 20 years of growth in these regulated markets at least that you saw comes in growth and you're seeing that here in the u.s that all the markets still growing even the most mature market in new jersey has continued to grow at record rates so i think what you what you'll see is that there's a large population that hasn't tried i-gaming in many markets and over time as everything else becomes more digitalized you get more people willing to to try and embrace the the benefits of digital gaming um you still see the lamb basically still you know maintain their their revenues but you start to see the states benefit even more from the increased iGaming player bases that will play both online and land based and those players will also only be digital but you always also grow an audience every year by people getting become the proper age to gamble it's a new class of people every year and on top of that you just have a larger number of existing populations in states that are going to try for the first time so i just think that this industry as you look back in european markets you'll see that it has it's not surprised to me that it's been consistently growing in the u.s and I would expect that to continue based on my experiences in other European markets prior to the U.S. market opening up.

Yeah, it feels like all the analysts that have covered this industry have kind of underputted on their estimates on the TAM, and everyone has to keep raising them time after time. So maybe everyone's got it right at this point, but it sure seems like there's opportunity for that to continue to grow.

Yeah, and I appreciate that response. And I guess I was wondering, maybe forget, you know, part three of the question is, like, there certainly was a reacceleration in iCasino growth in the second half versus the first half. And I'm wondering if, you know, if you can comment on reasons why you think that is an aggregate, you know, I'll leave it wide open if you could.

Yeah, Joe, I think, I mean, we just can focus on ourselves. And we know that, as you've seen, we've had tremendous growth. And I think we're getting better at everything we're doing, releasing great new product features and innovations. And you can see that. And this is really simple at the end of the day. It's about getting player counts, increasing player counts, and increasing your player values. And we've done both. So if you do that, you're going to grow your business nicely. And you do that by offering players a great user experience. And so what we do is we focus on execution and the things that we can control, which is exactly the way I described.

There are currently no questions registered so as a brief reminder it is star one to ask a question. The next question is from the line of David Hornthal with Private. My apologies. It looks like the last question was our last question. I would now like to pass the conference back over to Richard for any closing remarks.

Appreciate it. Well thank you again for joining us today. We look forward to updating you on our progress when we share our first quarter results in the spring.

That concludes today's call. Thank you for your participation and enjoy the rest of your day.