Rush Street Interactive, Inc. Q3 FY2025 Earnings Call

Good day, ladies, and gentlemen. Thank you for standing by. Welcome to the Rush Street Interactive Third Quarter 2025 Earnings Conference Call. Please note that this conference call is being recorded today, October 29, 2025. I will now turn the call over to Kyle Sauers, President and Chief Financial Officer. Please go ahead.

Thank you, operator, and good afternoon. By now, everyone should have access to our third quarter 2025 earnings release. It 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 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. 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 third quarter 2025 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, 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 thank you for joining us today. I'm pleased to report on another outstanding quarter that underscores the resilience of our business model and player-first approach. Our third quarter results demonstrate continued momentum and acceleration of growth across key markets, led by our continued outperformance in the online casino space. Before diving into our key quarterly performance, I want to highlight some important organizational enhancements to strengthen our leadership structure. We promoted Kyle Sauers to President and CFO, expanding his existing role to now oversee marketing, operations and commercial strategy in addition to finance. This change allows me to focus more deeply on innovation, online casino legalization and strategic growth opportunities, while Kyle drives cross-functional operational excellence across our existing markets. We've also elevated Rob Picard to Chief Strategy Officer, reflecting his contributions to our success. These changes position us well for continued execution as we scale our business. Congratulations to both Kyle and Rob. Now turning to our Q3 performance. Revenue reached a record $277.9 million, up 20% year-over-year, marking our 10th consecutive quarter of sequential revenue growth over the prior quarter. Notably, this growth was driven by very strong player acquisition and player engagement across our higher-value markets. Adjusted EBITDA of $36 million increased 54% year-over-year, demonstrating the operating leverage inherent in our business model as we scale. In total for North America, our MAUs increased 34% year-over-year, rising to 225,000. This represents our fastest quarterly user growth rate over four years and clearly off a much larger base of players. What makes these results particularly compelling is the continued acceleration of our growth in North American online casino markets, where we see the highest player value and retention. In our North American online casino markets, we delivered exceptional performance with 46% year-over-year MAU growth. This is also the second highest quarterly growth rate in over four years, again, achieved off a much larger starting player base. Even more encouraging, we've seen accelerating year-over-year growth in our North American online casino player base every single month since March, indicating a strong underlying momentum that extends well beyond any seasonal factors. While this rapidly growing player base is driven by our high-quality player experience and strong retention, we also had a record quarter as it relates to first-time depositors across the business, beating our prior high watermark by more than 10%, while doing so at very attractive customer acquisition rates. Turning to our performance in individual online casino markets. The breadth and scope of our success is encouraging. Delaware continued its noteworthy trajectory with 74% net revenue growth, demonstrating the sustained opportunity in this market even as it continues to mature. Michigan delivered 48% growth, its second fastest pace since Q1 2022. Even our most mature market, New Jersey, achieved 37% growth, the second fastest rate since Q1 2021, proving that established markets can reaccelerate with the right strategy and execution. Ontario grew 24%, its fastest pace since Q4 2023, while Pennsylvania delivered 15% growth, its fastest growth since Q3 2021. This broad-based acceleration of growth across markets of varying maturity levels validates our strategic approach of focusing on product differentiation and a high-quality customer experience. Our proprietary technology platform enables us to deliver unique gaming experiences that drive both customer acquisition and retention efficiently. In Latin America, we continued to build momentum with MAUs growing 30% year-over-year, climbing to a new record of 415,000 users. While Copa America in 2024 created a challenging year-over-year comparison in July, August and September both delivered over 50% growth, demonstrating the underlying strength of our LatAm operations extends well beyond major sporting events. Mexico revenue grew over 100% again this quarter, reflective of continued momentum and market share gains in that market. And in Colombia, while GGR again grew over 50%, net revenue was down 27% during the quarter due to player bonusing related to the temporary VAT tax. In Colombia, we continue to navigate the VAT tax environment. Our strategy of absorbing the tax impact while maintaining player experience has allowed us to grow our market position and continue to grow our player base at a fast pace. Our strong operational performance in Colombia positions us well for meaningful upside when normal tax conditions resume. As for the President's proposed 2026 tax reform, we continue to believe that Congress will not approve the proposed online gaming tax. Now I want to address several industry topics that I know are top of mind for investors. First, on prediction markets. We are monitoring this space closely. As a casino-first company, we see less direct competitive risk than sportsbook-heavy operators. In fact, if prediction markets create tax revenue erosion concerns for states, this could accelerate online casino legalization as states seek more protected revenue streams, a development that would actually benefit RSI given our market-leading experience in online casino. The second industry topic is sweepstakes operators. The proliferation of unregulated sweepstakes products with games that look, feel and play identical to regulated online casino games presents both a challenge and an opportunity. The reality is that this online casino gaming is already occurring across the United States through these unregulated and illicit channels. These operators generally pay no taxes, are not subject to consumer protection or responsible gaming standards and often raise concerns about targeting minors. States are faced with a clear choice, continue to allow this untaxed, unregulated activity or they can legalize online casino gaming and regulate it properly, ensuring strong and consistent consumer protections for their residents and generating meaningful tax revenue for their states. We believe the right choice is obvious and the sweepstakes proliferation only strengthens the case for regulated online casino expansion. Looking ahead, our pipeline of opportunities remains robust. We're excited about our planned expansion into Alberta and anticipate launching in that market on day one when it goes live. This represents a significant online casino opportunity that leverages our proven success in similar markets, such as Ontario, where we continue to hit new quarterly revenue records. We are also actively monitoring legislative developments across multiple U.S. states where budget pressures and the need for new revenue sources are creating momentum for online casino legalization. As we look toward the remainder of 2025 and beyond, I'm confident in our strategic positioning. Our focus on markets that include online casino, our proprietary and innovative technology platform, our marketing efficiency and our operational excellence creates a sustainable competitive advantage that is difficult to replicate. The fundamentals of our business have never been stronger. We're growing fast, efficiently, and profitably. Most importantly, we're doing so in a way that positions us for continued success in online gaming markets across the Americas. With that, I'll turn the call over to Kyle for a more detailed financial commentary.

Thanks, Richard. I'll now provide additional details on our third quarter financial performance and outlook. Third quarter revenue of $277.9 million increased 20% year-over-year, driven by exceptional growth across our North American online casino markets and partially offset by lower revenue in Colombia and some player-friendly sports outcomes in September. Once again, we see the results as demonstrating the consistency and durability of our business model. Online casino revenues grew 34% during the quarter, while online sports betting contracted 16% due to the elevated bonusing in Colombia. Regionally, revenue in North America grew 26%, while revenue in Latin America fell by 11%, similarly affected by the elevated bonusing in Colombia. Our gross margin was 34.0% during the quarter, reflecting continued improvement in mix shift to higher gross margin markets, but offset by player-friendly sports outcomes, which impacted Colombia results and bonusing and also, to a lesser extent, the increase in New Jersey gaming taxes. On the expense side, our disciplined approach continues to drive operating leverage. Marketing expense of $38.1 million was down 1% year-over-year while increasing sequentially by 5%. Richard mentioned this already, but it's worth reiterating, we had our highest North American monthly active user growth in four years, and we set another new record for first-time depositors for the entire company during the quarter, achieving this while further decreasing our cost to acquire players in North America by over 10% during the quarter, leading to continued leverage over our marketing investments, and this represents less than 14% of revenue. G&A expenses were $20.4 million, up 8% year-over-year, reflecting continued investment in our technology platform and operational capabilities to support our growth. As a percentage of revenue, G&A remained well controlled at 7.3%, and we continue to expect modest leverage over this line item as we scale. Adjusted EBITDA of $36 million increased 54% year-over-year, representing a margin of 13%. This demonstrates the significant operating leverage in our business model as we continue to scale. The strong flow-through from revenue growth to profitability underscores the quality of our revenue streams and the efficiency of operations. Looking at our key operating metrics, the strength of our performance becomes even more apparent. North American MAUs of 225,000 users with 34% year-over-year growth, our strongest quarterly performance in over four years. And more importantly, this growth is concentrated in our higher-value online casino markets. North American ARPMAU of $365 was down 5% year-over-year, which is expected given the impressive growth in the user base. As we've seen consistently, newer player cohorts start with lower spend levels and more bonusing before increasing engagement and player value over time. This is exactly the dynamic we want to see, rapid customer base expansion that will drive long-term value creation. In Latin America, MAUs reached 415,000, up 30% year-over-year despite the challenging Copa America comparison in July, the acceleration we saw in August and September with both months delivering over 50% growth and demonstrating the underlying strength of our LatAm operations. Our balance sheet remains exceptionally strong. We ended the quarter with substantial unrestricted cash of $273 million and no debt, providing significant flexibility for both organic growth investments and potential strategic opportunities. Our strong cash generation continues with meaningfully positive operating cash flow throughout the quarter. I'll also note that we have begun including our balance sheet and cash flow statement in our quarterly press release starting this quarter. Regarding our outlook, we remain confident in the momentum we've built and the opportunities ahead. The acceleration we've seen in North America online casino markets every month since March gives us confidence that this growth is sustainable and not merely seasonal. We continue to expect to maintain marketing leverage for the full year with marketing expenses growing at a lower rate than revenue. Our G&A investments are focused on areas that directly support our growth, particularly technology and product development capabilities that enhance our competitive differentiation. Looking at the fourth quarter and beyond, we believe we're well positioned to continue delivering strong performance. The seasonal strength we typically see in Q4, combined with our accelerating market trends, positions us for a strong finish to 2025. We remain excited about our expansion opportunities, particularly in Alberta, where we expect to launch when that market opens. Our success in similar markets gives us confidence in our ability to capture meaningful market share quickly. In summary, Q3 represents another quarter of exceptional execution across all aspects of our business. We're growing faster, more profitably, and more efficiently than ever before while building a foundation for sustained long-term success. Based on this continued strong performance, we're raising our full-year revenue and EBITDA guidance. We expect 2025 revenue to be between $1.1 billion and $1.12 billion, up $35 million at the midpoint of $1.11 billion and representing a 20% year-over-year increase. For the full year, we anticipate adjusted EBITDA to be between $147 million and $153 million, up $10 million at the midpoint of $150 million, which is up 62% year-over-year. And one last reminder, our guidance includes only those markets that are live as of today. And with that, operator, we can open the line for questions.

Our first question comes from Dan Politzer with JPMorgan.

This is actually Sam on for Dan. First, I think if we think about your updated guidance, it implies fourth quarter incremental margins at the midpoint of around 20%, which is below recent levels. I think you talked about some increased marketing in the fourth quarter, but is there any other color you could provide around puts and takes, maybe like a sports betting unfavorable holds from sport outcomes?

Yes. Thanks for the question, Sam. I think I'd point to, yes, the increased marketing spend. As we've pointed out in our prepared remarks, we've been having really good success bringing on a lot of new players and at attractive rates. So that's part of it. I think the other piece that I would put in there is just the ongoing VAT tax that goes through the end of the year in Colombia that's impacting gross margins and revenue growth down there a little bit.

And then there's some recent news coming out of Mexico, they're considering a potential increase in gaming tax rates. Was this something you were anticipating going into the year? And how would you kind of think about increased tax rates impacting kind of how you operate in that market?

Yes. We've been tracking that. I wouldn't say it was something that we anticipated heading into 2025, but it does appear that in Mexico, the gaming tax is likely to increase from a current rate of 30% up to 50%. There have been and should continue to be ways to reduce the effective rate below these amounts. But we'll keep you updated next year, assuming these changes get enacted and what that means for us and if there's any difference in the way we approach that market.

Our next question comes from Bernie McTernan with the company, Needham & Co.

Maybe just to start and keeping on the LatAm theme. What should we be looking for in terms of like next steps for what's going on in Colombia and the VAT tax? And maybe, Richard, just gauge your, I don't know, probability of it going through or not, if it's still a high degree of confidence or not?

Sure. In Colombia, the President's tax reform needs congressional support. Recent articles may not clearly convey that it requires backing from Congress, which currently seems insufficient to pass it. If the reform does not go through, the usual tax conditions will likely return. The political landscape is going to be quite active in November, and the President and his party remain unpopular. Therefore, it's our current view that the proposed tax reforms are unlikely to be adopted.

Understood. Richard, you mentioned the recent press release regarding Kyle's promotion to President, which allows you to shift your focus towards more strategic and broader initiatives. Can you share any insights on why this change is happening now or what specific areas you will be concentrating on going forward?

Sure. First of all, I think Kyle deserves this opportunity; he has done a tremendous job for the company since he joined us, and the support from the Board, colleagues, other executives, and everyone in our community has recognized how deserving he is. However, I have also realized that the impact on our company from having additional states legalizing online casinos is profound and significant. As I mentioned on prior calls, there are opportunities to enhance how our industry lobbies and develops its messaging, and I believe that this will be more effective if I can spend more time collaborating with peers to create a stronger alignment than we have seen in the past. Legalizing online casinos requires a strong and dedicated effort to accelerate the progress, and I think we can achieve results with additional focus. Additionally, we hired a new CTO earlier this year who is off to a tremendous start. I am excited about working with him and the team to deliver enjoyable experiences that players want and can't find elsewhere. Ultimately, we want to enhance our business’s innovation and differentiation, which has been key to our success and is why our ARPMAUs are significantly higher compared to others. We consistently implement new ideas that consumers enjoy and appreciate, and we have a team passionate about creating these experiences. However, we need to do more in this area. As some of you know, I have a long history in the product side, and I believe there is a great opportunity to enhance our pipeline and speed up the process. I am also excited to focus on innovation. Furthermore, there are numerous strategic opportunities within the industry that need our attention. We must ensure we effectively evaluate how to allocate our capital for the highest returns by comparing all available opportunities. It's essential to maintain the right focus to act when we identify the right opportunities and to have the necessary support for success. These are the key areas I'm aiming to concentrate on.

Certainly, we feel the similar sentiment towards Kyle.

Thank you.

Our next question comes from Jordan Bender with company Citizens.

So the state reported data doesn't always tell the whole story, but it does look like you got a little bit more promotional on the sports betting side of the business later in the quarter, which we can kind of see in your handle accelerating. Curious as to what you're seeing in the market that's making you lean in? And are you seeing anything elevated from your end or the market's end as we head into the fourth quarter here?

Thank you, Jordan. I don't think there's anything particularly significant happening in the industry. Everyone has their own approach as we head into the football season. Like all operators, we're refining our bonus strategies across various markets, which may differ slightly, ensuring that the bonuses reach the right players. Overall, there's no major shift in our strategy.

And then if I can follow up in Colombia, if I caught it right, I think you said NGR down 27% in the quarter, which, if I heard that right, would kind of represent a pretty meaningful deceleration from what you saw in the first two quarters of the year. I guess, like is there anything structurally different from what you're doing in that market? Obviously, it ends here in a couple of months, but just curious on why the deceleration there.

Yes. So just to be clear, I don't think I would refer to it as a deceleration because the player count growth was still super strong. GGR growth was still super strong. This was about the bonusing that we're doing to offset the VAT tax on the players. And it was a bit more painful for us in Q3 in terms of the impact on net revenue. And part of that comes from better sports outcomes. And then because of that, you have players who have a little bit fuller balances in their accounts. So there's a little more churn with deposits and withdrawals, which creates more bonusing. So that's really, how I would describe Q3 as it relates to Colombia, but not a deceleration. It was more about the bonusing.

And I would just add that the handle, the gross gaming revenues, the player volumes are generally in line with the growth we were experiencing prior to the VAT tax implementation. So we continue to see really healthy growth in that market.

Our next question comes from Ryan Sigdahl with the company, Craig-Hallum.

Really nice results. I want to start kind of in the U.S. and then we'll move to Latin America, like everybody else. But you announced some nice payment processing partnerships, Sightline Payments for an integrated debit solution. You have BurraPay for crypto. But you guys seem like kind of a leader, first mover on a lot of that stuff. Curious how those partnerships came about? Any metrics you're willing to give from a percentage of players that are using these or have adopted? And then kind of how you think about the cost savings versus potentially even customer retention features of these.

Right. Sure. I'll take that one, Ryan. Thanks for the comments on the quarter. Yes. So it really starts off with sort of a reputation that we developed over the years, I think, as a thought leader and an innovator in our industry. And when you have to pioneer new payment methods, in particular, it's extraordinarily complicated and requires not only engineering teams but compliance, operations and every sort of partner and all stakeholders have to sort of align together and figure out really tough challenges and how to execute on them. And I think we've done it before as we have. We're a natural company that people want to partner with because we have a track record and a history of delivering new experiences to customers in a great way. In the case of Sightline, their Co-Founder, CEO and myself have a relationship going back many years, since they launched their business, and our teams get along extremely well. And we recognize that together we could deliver an experience that is solving a need that industry has, especially for us. And so we had a very collaborative and terrific relationship, and we launched that product, and we're really excited for it. But it's still very early and I don't have any metrics to share on this call and at this time. For BurraPay, other long-time executive industry approached us, again, for similar reasons, knowing that we have a great reputation, I think, and are able to pioneer new approaches. And similar to the Sightline experience, we were able to agree on a framework to work together and collaborate to deliver great experiences. So payments are key to our industry. And when you can innovate and find ways to solve players' friction, deliver more efficient experiences for them, it makes a difference. And so we tend to do that in Latin America very well, and we're doing that equally as well, I think, in the U.S. market.

Yes. And the only thing I would add, Ryan, I think you hit on it, but there's two reasons for these types of innovations around payments. The first is, obviously, to have a great player experience and a journey where it makes it very easy for players to feel comfortable, trust the platform, get their money on and off the platform when they want. And then the second piece is to make sure that it's improving our financials and reducing costs over time. So when we can accomplish both of those things at the same time, that's a big win for us.

Yes. Looking at Colombia, we don't need to discuss the chances of tax reform; we'll wait to see how it unfolds. However, I view it positively regardless and would like to hear your thoughts on it. Ideally, it won't extend into next year, leading to an immediate benefit. Alternatively, it might take some form. My question is whether you anticipate operators altering their strategies or behavior. It seems like everyone was acting as if they were temporarily absorbing the VAT tax this year, believing it would be eliminated. But if it becomes permanent, they might either reduce their efforts or stop altogether, which could lead to improved results next year.

Yes, that’s a valid point. I believe that regardless of the outcomes we might face, next year should present a better scenario for us. Looking at the numbers, for the year, GGR has increased by nearly 60%, while net revenue remains about the same. This is partly due to the initial months of the year where bonusing and VAT changes weren't implemented until late February. If we focus on Q2 and Q3, GGR has surged by almost 65%, whereas net revenue has dropped by nearly 15%. This reflects the impact of the increased bonusing practices we've adopted, similar to what other large operators are doing. Moving forward to 2026, the elimination of VAT will undoubtedly positively influence our revenue growth, especially since we've seen GGR rising over 60%. On the other hand, if all operators decide to reduce or eliminate bonusing, it may be detrimental to GGR, but it should significantly enhance our net revenue and profitability. Additionally, by the end of February, we will be effectively past the bonusing that was a response to the VAT tax, which could also be advantageous for us.

Our next question comes from Joe Stauff with the company, Susquehanna International Group.

I wanted to ask, Richard, on your comments about the sweepstakes market, what states that you operate in currently do you consider to have a pretty substantial headwind in terms of sweepstakes operators operating against you?

Well, remember, there's sweepstakes across poker and across sports and across casino. So, I guess a couple of large states have been fairly effective at having the regulators sort of issue cease and desist letters and removing some of the competition. I'll mention Michigan is one example and Delaware is another example. In other states where you operate with online sports betting and some efforts to legalize online casino in Virginia, a market that does still have sweepstakes, for example, Illinois still has it as well. So it's really a mix across the country of states that have been able to sort of exit the sweepstakes and others that have not. So, it's not a very clear cut. In some cases, some of the larger sweepstakes operators leave, but there's others that still stay. So it's not a very clear image and a lot of confusion sort of what the status is in some of those individual states.

Got you. So for iCasino in particular, maybe of your more material states, Michigan, Delaware or maybe the states where it's a little bit cleaner, whereas the other ones, not so much.

Yes, I'm not actually familiar with the latest in a couple of those other states other than the ones I referenced.

Got it. And in terms of just the reinvestment you did in the third quarter and the reacceleration, for instance, especially like in a state like New Jersey, if we think about the first-time depositors, which you said was a record, was it heavier in certain states than not? Or is it more kind of across the board?

Thank you, Joe. It is definitely concentrated in markets where iCasino is available, including Ontario and the other states we operate in. We are confident that our product is differentiated, which gives us an advantage. That's where we are directing our marketing investments, and the results are clear. Our 34% growth in monthly active users in North America is impressive, and in the iCasino markets, we saw a 46% year-over-year growth. This shows that our investment is paying off and we're experiencing significant success.

Our next question comes from David Katz with the company Jefferies.

First question, Richard, I think you talked about prediction markets a little bit. But I'm not sure if you said whether you would be potentially looking into offering it if it became a legalized context to do so?

I don't think I addressed that, and I predicted you might ask this question. So the truth is, is that when it comes to prediction markets, the legality of it is being debated across the federal government and state jurisdictions right now. A handful of states, as you know, are actually pushing back against prediction markets as unauthorized offerings. At RSI, our focus is on our core business, delivering sustainable growth while navigating the regulatory landscape responsibly, which means that we aren't going to be a pioneer. While we're very innovative in a lot of ways, we're not going to be a pioneer in this category. But certainly, we have to have an even playing field ultimately, depending on whatever happens. But we're certainly monitoring it closely, aware of everything that's been happening and don't expect to be pushing any limits because we certainly respect the state gaming licenses and recognize that licenses are a privilege at a state level, not a rights. And so we have to be very cautious and make sure we're compliant with those stakeholders there that feel strongly on this topic.

Understood. And if I may, as my follow-up, Kyle, if I can still address you as Kyle. I noticed that there wasn't any share repurchase in the quarter. Just curious if there are sort of other uses there or what the philosophy was behind that.

Yes, thanks, David. We didn't do any buybacks during the quarter. I continue to view future buybacks as opportunistic rather than routine. We plan to stay flexible with our buyback authorization and ensure we have sufficient resources for new market opportunities or other ventures.

Our next question comes from Jed Kelly with company Oppenheimer.

Regarding the iGaming growth in some of your more established states, could you elaborate on what factors are contributing to that increase? Is it primarily due to exclusive product content, changes in bonusing strategies, or are you capturing market share from other competitors?

So Jed, I'll start and maybe Richard will join in. But I think it's everything. When you look at the growth in monthly active users, it's not only about attracting new people to the platform; it's also about having a great product and a unique experience that encourages users to return daily. We have successfully brought users to the platform, as evidenced by this quarter's record number of first-time depositors, which exceeded our previous record by 10%, achieved last quarter, without increasing our spending. This highlights the effectiveness of our marketing team and their initiatives. We have invested in expanding this team, and their performance continues to improve. Importantly, there's still room for us to enhance our efforts further. The surge in new users and our ability to retain them is indicative of our business's strong momentum. As noted in the prepared remarks, our year-over-year growth in monthly active users has accelerated every month from March through September, which is quite impressive, and we are very excited about it.

And just as a follow-up, what do you think is more of a catalyst for further iGaming legislation? Is it prediction markets or sweeps?

Sure. I think both have a meaningful role to play, because in one case, prediction markets is reducing the sportsbook revenues potentially that states will be obtaining from the sports betting statewide frameworks that exist. If that happens, certainly, online gaming is a safer, more protected category of casino revenues that would be sustained. It certainly helps that online casino generates four times the tax revenues of sports betting. So as states have more financial pressures, and I think as the big federal bill starts to get implemented in the next couple of years, you're going to have increased financial pressures on states. And as we've seen some stakeholders in the discussion recognize online casino represents one of the very most available, accessible, proven, reliable opportunities for states to have a meaningful additional source of tax revenue. So, it's a financial element on sweepstakes, certainly, the fact that the size of that industry is not to be underappreciated. It's a multibillion-dollar industry, and there's a whole large volume of customers that could be online casino regulated customers that are right now playing these sweepstake sites. And I think it's interesting that when you do have folks opposing online casino being regulated, you don't have the same effort usually applied towards operating the sweepstakes market that already exists today. So certainly, the existence of it and the fact it's not taxed, and as I said in the prepared remarks, not tax doesn't protect consumers, really add no value to a state in any way. It just has a negative consequence versus the online gaming regulatory process and legalizing it adds a lot of value to states by protecting consumers and generating taxes and creating opportunities to fund resources to local causes and public services that need that sort of support. So I do think that these things are going to help plus the financial needs of states. And as I said earlier, having better alignment in our industry is really important. And as I have more availability, I hope to be able to focus on these things, I'm hoping to be able to deliver some accelerated efforts in some of the key jurisdictions that are important for us in the future.

Our next question comes from Chad Beynon with the company Macquarie.

I feel like we covered everything on iGaming. For sports betting, maybe wanted to ask one just in terms of how the customers have reacted just with in-play. So we have heard that there was, obviously, customer-friendly outcomes for American football and for soccer, I think, in September and for October, so that probably hurt hold. But just in terms of the in-play percentage helping hold, does that continue to look or does that continue to grow from a year-over-year perspective? And if we see normal outcomes, that could lead to a year-over-year increase in hold?

Yes. Thanks, Chad. So we have continued to see improvement in the percentage of betting that goes both to parlays, SGPs and to in-game. That's been an initiative for us for quite some time. So those trends have been positive for us. Interestingly on the hold, absolutely, there were some player-friendly outcomes, as you pointed out, and it's well publicized, particularly in September. So that did create some headwind. But I will point out that our sports hold in the U.S. actually hit its highest point in our history in Q3, even with those tougher outcomes. So I think that's a pretty good reflection of how our team has been able to continue to improve the product and the offering and drive players to a better mix of bets.

Regarding Colombia, you previously mentioned that the VAT tax would result in a low double-digit impact on EBITDA. You have outlined your strategies to counter this for the third quarter. Considering the potential guidance increase and possible outperformance in Q3, can we assume that part of the positive outcome may be attributed to the growth in monthly active users? Also, did we see any positive variance compared to the VAT impact initially anticipated?

I understand your question clearly, but I'll provide my answer and you can let me know if it addresses your inquiry. When considering Q3 and the increase in guidance, it's primarily driven by the continued growth in monthly active users, meaning more players, along with strong performance in the North American iCasino and solid operational results in Latin America. However, we experienced more pressure from bonuses in Q3 than we initially expected, partly due to favorable outcomes for players in sports betting. Did I address your question?

Our last question comes from Mike Hickey with the company Benchmark.

Richard, Kyle, congrats on the quarter. And Kyle, congrats on the promotion. I dropped myself, guys early in the call. So this question seems obvious. But on the prediction market in states where you have market share, call it, Delaware, are you seeing any pressure from Kalshi, soon to be Polymarket in that state or states? And I have a follow-up.

Thank you, Mike. Yes, I'll respond to that. The reality is that we have not observed any impact to this point in the states where we are operating sports betting. We are still looking into it and actively monitoring the situation, but we haven't noticed much of an effect.

Richard, do you see anything on the prediction platforms in terms of innovation that you would potentially integrate into your online gaming products, OSB products?

That's a good question. We have people examining it closely. I think we're still trying to understand that while it's often referred to as a peer-to-peer experience, some large companies are taking positions on one side and essentially replicating what a sportsbook does as the house. I believe that the BFS industry has made many smart, pioneering moves that sportsbooks could and should adopt in how they communicate propositions to players. You will see which types of markets gain traction in predictions; some unexpected ones may become popular, and it's up to companies like us to determine how to enhance our offerings. We will be closely monitoring this. However, it's still somewhat early to draw significant conclusions because the prediction markets are less regulated than we are. In many instances, they may be self-certifying, and we could see developments in the future that merit our attention. What we observe now is the industry attempting to mimic sports betting, looking at how to implement same game parlays, for instance. Currently, it seems they're mostly trying to replicate our business model. However, if that market were to develop, there may eventually be an exchange of ideas in the opposite direction as well.

Last question from us. Do you think that the conflict between Trump and the Colombian President is generating more or less support for him regarding his potential tax changes? Additionally, considering the situation in Colombia, does it affect your interest in expanding further? Brazil, Ecuador, Chile, and Argentina are all intriguing regions that you might want to explore, but does the situation in Colombia make you hesitate to invest in other Latin American countries?

Yes. I’ll address your second question first, and the answer is no, it doesn't diminish our interest. There is significant effort required to gain the right experience in Latin America. We believe these markets are just beginning their growth. As we continue to grow ourselves, we see many opportunities, and there is a large population across Latin America that is in the process of or will be legalizing online gaming in the future. We are very excited about this. In fact, some developments in these regions mirror what is happening in the United States across various markets. It feels like anything is possible these days anywhere in the world. We are certainly optimistic about the Latin American market and are confident we can manage what we can and execute effectively while influencing how we wish to shape frameworks in a viable manner. We are looking forward to the future in Latin America. Regarding the situation in Colombia, we haven’t encountered any evidence of anything affecting us. We have been a good corporate citizen there, are well-respected in the industry, and feel very confident about the taxes we contribute and the quality of our operations in Colombia. So, my answer to your question would be no.

At this time, there are no more questions registered in the queue. I'd like to pass the conference back over to our hosting team for closing remarks.

Well, thank you for joining us today. We're excited about the road ahead and look forward to sharing our continued progress when we report our fourth quarter and annual results next year.

That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.