Conference Transcript - RSI 2026-05-14

Bernie McTernan, Analyst — Needham & Company

Great. Good morning, everyone. Thanks for joining us. My name is Bernie McTernan. I'm the Internet Analyst here at Needham & Company. My pleasure to be joined this morning by the team at Rush Street. We have Richard Swartz, CEO, and Kyle Sowers, CFO.

Richard Schwartz, CEO

Thank you both so much for joining us. so um a lot's happened in the last year um really maybe just wanted to start what what do you think has been um you know maybe catch investors up in terms of what's been the most impactful to to the story yeah so i i would say that uh our consistency and our stability as a as a digital leader um it's been something that's really caught the attention of the investor community We're now four years of consistency of executing on our goals of expected financial objectives, gaining market share in North America, I can see, you know, despite that being a hotly contested market with everyone focusing a lot more energy on that, still continuing to outperform, setting records in terms of new volumes of new customers at record low prices for us. So having success acquiring customers when others are, I think, struggling. Then, of course, delivering the revenues product to the user at the highest rates in the industry. So North America just goes from strength to strength. And then we have the Latin American business also, which has continued to grow at an extremely fast rate, faster than I think most people expected. And we've now seen that not only can we have and continue to grow as fast as we have in a market like Colombia, But other markets with venture like Mexico are also having similar growth profiles and are ahead of where we were at the same time years ago with Colombia. So there's a lot of optimism about our path to continue to grow all parts of our business.

Bernie McTernan, Analyst — Needham & Company

Yeah, no, that's great.

Kyle Sauers, CFO

Let's start by focusing on the U.S. record first-time depositors in the first quarter. um you know i i'm assuming it's it's a lot it's a lot of different things stacking up on top of each other but but what's working in particular yeah maybe i'll jump in richard i think uh you're right it is it is everything we've gotten asked the same question on the earnings call the last several quarters like is there some is there some magic bullet or one thing that you've you've gotten access to or started doing differently And the reality is it's all kinds of things. So Richard can talk plenty about the differentiated user experience and retention and how we keep people around and all the promotional tools we use that we think are very unique. But the reality is we're filling the top of the funnel faster than we ever have. We've had record first-time depositors for many quarters in a row now, and that's in an environment where we haven't launched any new markets, which is usually when you see all of the incremental player ads at a faster pace. And we're doing so at record cost. So by record, I mean the lowest they've been to acquire players. So we've actually been starting to spend more in marketing recently than we previously had and kind of re-accelerating there because we see the value to be so good, both the value of the acquisition, but then the value of the players that we're bringing on. And I think as you mentioned, our player growth rate in iCasino markets being over 50% and for a few quarters in a row here being at very high levels and expectations for us to see really strong continued growth in player count. that's just such a good leading indicator for for what's to come and i think i think the q1 results and revenue revenue beat was an example of uh how those players drive revenue uh for us over time yeah and and so there's there's clearly a ton of momentum in the business um when you guys were in it's almost you know investors are in amazement in terms of like how fast you're

Bernie McTernan, Analyst — Needham & Company

growing U.S. MAUs right now. Was there any leading indicator that gave you insight that you would be able to grow? I mean, you said North America, iCasino, MAUs growing over 50%. Like, what was the leading indicator there that gave you insight that this could be possible?

Kyle Sauers, CFO

Yeah, I mean, I think, so first of all, I think you know us well enough that we're not going to get on a call and pound our chest and say this is going to continue at these fast rates for forever um but we we have so much opportunity because there are so many players out there who just have never heard of bet rivers or have never tried us we have we have that advantage i think when i'm saying leading indicator i'm really more referring to the growth in our players um very rapidly which in the near term actually decreases the average value of the player because you're diluting it so quickly but but that should reverse course over time i think i I think the indicators are what we've been doing with reactivations, what we've been doing with new ads, and the value of the players that are coming onto the platform today being still very, very solid, and that we've been pretty dynamic and iterative with how much we are spending on marketing and which channels we spend it in. Because when we see things working, we can generally adjust those things pretty quickly and put more to where good things are happening. So I think that's been part of the excitement over the last year or so, is that we're seeing places where we can win more players and we're putting more dollars to it. Um, so we're, we are remaining pretty flexible on that because it's, it, it's fairly obvious when we get on a quarterly call, if, if we've spent our money well or not, uh, based on what's happening with, with new players coming onto the platform and, uh, the active players that we, we keep coming back.

Bernie McTernan, Analyst — Needham & Company

Yeah, it makes a lot of sense. And maybe from a modeling standpoint, obviously, we're in this period now where you're adding so many first-time depositors. It's weighing on ARPU. But how should we think about it? You know, as we're thinking about revenue growth in the future, thinking about that balance of continuing to add MAUs, but then also ARPU as well.

Kyle Sauers, CFO

Yeah, it's interesting. If we went back a year ago, I firmly would have said, you know, player count's going to be the bigger driver, not as much from the average player value. And I think to the extent we're able to grow players at a really significant rate relative to the market like we have been, that's going to continue to be true. I mean, if we're growing players at 30%, 40%, 50%, 60%, the revenue growth is going to come from that. But there will be a point in time at some point, no new markets launching in that scenario, player growth will slow at some point. And then I think that's when you see the player values start to contribute more to the revenue growth. But we're very confident that as that player growth slows down at some point in the future, that the player values are going to come back. Because you just have so much bonusing early on. You have players who are only around for a part of the new month and aren't contributing as much. It takes a while for retention to build with new players. So all of those should move us towards, you know, continued solid growth. We're very, very optimistic about the growth opportunity in North America, even without new market launches.

Bernie McTernan, Analyst — Needham & Company

Yeah, and maybe talking about new market launches, I think the most recent one, Delaware. How's Delaware going? Is it still a significant contributor to growth?

Kyle Sauers, CFO

It is. So I think the latest state data that's been out has shown Delaware growing at 50% to 60% year over year. There's some point where that's going to slow down, but we continue to have really nice player acquisition there. Player retention is strong, obviously, as the only operator on three different partner brands or co-partner brands. um that we don't have the the competition there um that we need to deal with but i think there's there's a lot of growth left there i think when we launched delaware or shortly thereafter we talked about it being a you know at some point being a potentially 300 million dollar ggr opportunity and we're not there yet but we've we've been uh getting there pretty quickly So maybe there's a chance we've underestimated the longer-term opportunity in that market.

Bernie McTernan, Analyst — Needham & Company

Got it. Want to make sure we hit on LTV to CACs. And there's a lot of maybe increased spending on the online sports betting side of the industry. I mean, Cal State just raised a billion dollars. Where are you seeing CACs trending? And is this what's going on in prediction markets impacting maybe your tax where you're traditionally spending on on, you know, iGaming first customers?

Kyle Sauers, CFO

Yeah, it's a good question. And I think there's we've had a few of our peers talk about some pressure around, you know, marketing that's centered around sporting events. Right. And that that just in North America, that just isn't where we are putting a lot of capital to work. Most of our marketing spend is going into markets that include iCasino. It's generally iCasino-led, and I think we are just in different places going after generally different audiences. We'll all work to cross-sell, not the prediction market folks, but the traditional operators. We're all working to cross-sell after we bring players onto the platform. But we had our lowest CACs that we've had since going public this last quarter again in North America. So we're simply not seeing pressure from that, at least today.

Bernie McTernan, Analyst — Needham & Company

And so therefore, if CACs are record low, your LTV to CAC must be through the roof.

Kyle Sauers, CFO

It's very solid. You could certainly – I mean, we have been spending more on marketing, and to the extent it's working, we're going to continue to keep spending more because the values are very strong. It may have been one of your firesides or somewhere else, but I recall a year ago talking about how much our CACs have come down and how we felt like they were probably somewhat industry-leading. uh and then we get a year later and they're they're far lower than they were um so so uh that's what our marketing team said they'd be able to do uh but we don't we don't like to build that level of uh optimism into our into our guides yeah no understood um and so one to transition over to prediction markets um seems like we can't have an investor conversation or a conversation with investors on the online sports bank and it's true though talking about prediction markets right

Richard Schwartz, CEO

now um how do you you know is this a competitive threat to rsi just just how how do you view this um you know how do you view this kind of increased um you know new players in the market yeah hey as a as a casino first operator you know we're staying extremely focused on what matters to us which is the casino market space and as you see in calci and there and robin and a group of Others in that coalition, the leaders in prediction, came out recently and said, hey, casino is not saying they're going to focus on, it's not off the table, it doesn't have the same legal justification as trading on sports markets. So as others are distracted and focusing on that part of their business and having to spend huge amounts of money and executive attention on that, we're focusing on executing and innovating further in the casino-first space. And frankly, it's given us a great chance to legalize online casino in some jurisdictions that are at risk of losing in their perception some of the revenues from sports betting and having less certainty on the future of that revenue stream as a tax stream. So it's given us a chance to go in there and say, hey, it's a disruptive moment in time. Let's try to legalize online casino at accelerated rates. And so I think that's actually going to be helpful for us. So we feel really good about the fact that others are having to have higher costs to acquire customers, as you heard Kyle mentioned from marketing, having a lot of others distracted on the sports category while we are just continuing to be executing on the things that matter most. And, you know, I think we have a structural advantage over others and a product advantage in that we're focusing on iCasino, which is the most attractive segment of online gaming. You know, in states like Pennsylvania, where you have both sports and casino, you know, 80 percent plus the taxes are coming from casino. It's a larger market. Slop audience alone is larger than sports betting, but everyone's spending all their money and time on sports. And we're happy to have them do that so we can continue focusing on what matters and continuing to differentiate our experience to continue to advance the reasons why players stay loyal with us, which ultimately is the most important thing is the player finds us. We need to keep them with us. So how do you do that? You treat them well, you offer them experiences that are fun, that are unique, and that they feel like you're there being thoughtful with them, treating them well, and then you have that retention that comes from that. So I think that's just the opportunity for us, which we're taking advantage of right now.

Bernie McTernan, Analyst — Needham & Company

Yeah, no, that all makes a lot of sense. And I certainly want to touch on regulation, but just sticking on prediction markets for one more second. What would get you to launch your own prediction market service, or is that just off the table?

Richard Schwartz, CEO

I think we're always monitoring the situation where there's nothing that's happened in the last two years in this space that we weren't aware of in advance or following closely. Certainly, if anything was to change where the market became attractive for business with our profile, then we would certainly be able to put steps in place then to execute on that. So we certainly are never going to be caught flat-footed. So we're always monitoring and have strategies in place so there would be an opportunity that makes sense for us.

Bernie McTernan, Analyst — Needham & Company

Okay. Understood. And so, yeah, moving over to legalization and regulation, I mean, will this finally be the year that we're going to get more material legalization of online sports betting and iGaming? Because it makes, with the rise of prediction markets, at least to me, you know, it makes all the sense in the world that you would have increased market access, states, you know, losing or, you know, realizing potential lost tax revenue, but we just haven't seen it yet. So what's your view here?

Richard Schwartz, CEO

I think right now is a great moment. I say now I'm not suggesting it's going to happen this calendar year, but the work's being put in right now. Virginia came very close recently. There's still an opportunity in Virginia this year through the budget process. That's not getting a lot of attention, but it's an opportunity that we're still following and involved with. Certainly, if it's not this year, next year looks promising. But there's also a large thing. We have Alberta opening in July, so another nice, very attractive market for casino opening in North America that we're going to be targeting. But in terms of other jurisdictions, too, you have a few things happening. One is you have all our competitors and us aligning around the desire to have online casino legalized. Like I said, only 12% of the U.S. population today has online casino, whereas over 50% are sports. There's a big differential between catching up with some of the casino offerings with the states that have sports. And as they have the risk of losing some of the revenues from sports, but more interesting, I think, is the fact that the federal government will be reducing a lot of the Medicaid matching funds come after the elections in November. So states are going to start to have a shortage of material amounts of funds that they've had in the past to do a lot of their matching programs to the federal government on Medicaid. And so states like New York and Illinois are going to have even greater surpluses in this area, and they all recognize the value of online casino being a meaningful, proven, reliable method to raise taxes at a large volume, a large dollar amount. You look at Michigan, they've generated a couple billion dollars in revenue the last five years. It's a meaningful, moves in the needle number for all these states. And I think the other thing that historically has been a challenge is some of the legislators or members of Congress will sort of, or the state legislators will say things like, well, we don't want someone to have a slot machine in the purse or in the phone or in the pocket carrying it around. And what you start to realize with gamification happening around the industry everywhere, that, you know, you can already, every individual can already play sweepstakes casinos or crypto casinos on their phones. So the idea that we're going to sort of ban something that already exists, proliferated everywhere, isn't really as strong of an argument as it was in the past where maybe this didn't exist. So now we're like, hey, this is already existing, so you might as well protect your consumers, have responsible marketing, responsible gaming tools in place, and obviously generate the huge tax revenues that I just mentioned earlier are very real and proven in this category. It's not a guess. If it's going to happen, it will deliver the results of the predictions and projections show. So I think all these things, competitors collaborating, big opportunity with the deficits, proven more reliable than other sources of tax generation and the prediction market competition, I think are all things that bode well for us as we try to lobby for more states to legalize it faster. And by the way, we have all these Latin American markets legal today already that we can enter. So we don't have a shortage of opportunities, which is exciting for a company like ourselves, where others maybe are waiting for another U.S. state as their primary strategy for expansion. You know, we have multiple other markets in Latin America that are attractive that we're looking at opportunities to expand into and given our success in existing markets down there. You know, that's something I think investors should be really excited about long term for us.

Kyle Sauers, CFO

Yeah, and I was just going to add in on that, since Richard was talking about Virginia in particular, just so it's a good example. You know, a good comparable to Virginia would be Michigan, where we've continued to grow a share over time, but didn't start with any database or real brand awareness or a partner there that had a database that we could use. And, you know, Michigan's approaching like a $300 million GGR run rate for iCasino for us. So you take a place like Virginia, a little lower population, probably a little higher average player value, we would have strong brand awareness, partner with a database, could be a very meaningful market for us. And, you know, if we're able to layer in, you know, a New York and an Illinois over a few years after that, you're still at a pretty small percentage of the population. But the benefit to us is pretty outsized and could be very meaningful.

Bernie McTernan, Analyst — Needham & Company

Yeah, no, it makes a lot of sense. One state you didn't mention was Maine. What's the opportunity? What's the latest there? Is that an opportunity for Rush Street?

Richard Schwartz, CEO

Yeah, I think it is. For sure, we're engaged in opportunity discussions there, but it's a little bit of a slow process because there's a lawsuit happening there, and I think there's a lot of efforts going into sort of preserving the legislation as a viable regulatory scheme. So I think we're waiting for that to kind of evolve and mature and certainly actively involved in the opportunity there.

Bernie McTernan, Analyst — Needham & Company

Okay. Let's move on to LADAM. um you know the the player growth has been phenomenal and then obviously the what's going on with just like the the lapping of the tax dynamics in columbia um can you just talk though to the competitive dynamics this is a question we get a lot from investors is just you know who you're competing with um you know particularly in columbia but just you know yeah we'd love to know more about the competitive dynamics um in the region sure uh well maybe i'll start uh there's in columbia there's two competitors that when we enter the market they own 90 plus of the market combined so it reminded me of the early days of ando draft kings in the u.s

Richard Schwartz, CEO

where they were kind of dominant brands that had evolved from unregulated businesses and had already had brands and databases similar to what you saw with the daily fantasy in the U.S. where the brands that came from those backgrounds already had brand awareness and players already playing with them. So it became an easier transition for them to become leaders in that market. The other competitors at the time, they were probably about 20, none of them had any market share of any size. And to this day, it's still the same case, where there really hasn't been anybody else who's been able to grow their share to a meaningful market share other than us. So we came in the market and consistently grown from day one. Every quarter after quarter, we grow. and we've now last year passed the number two operator and so we've now become the number two player in the market and we're growing share on the front on the top player they're good companies they're these they're strong uh teams but we think what we bring to the table is so unique and i think relative to what we have to compete with in the u.s market where you have a lot of other operators um that are even you know pushing the limits as well i think it's it's it's been our product was received really well there's i think it stands out even more from the casino player standpoint uh and the sports book frankly is equally as strong there for us so i think it's just a product experience we brought we built as a company to compete in north america helps us to also even be stronger in latam uh and in mexico there's another company named caliente that's been the dominant player themselves with 70 plus market share for a decade before we entered the market and uh we and a couple others have been growing share at their expense i would say the last couple years and when we launched in mexico we were probably 60 70 companies and little by little every quarter we've been growing share reflecting a similar experience we had in columbia where you know there are a large number of competitors and we kind of emerged as one of the top ones and i'm proud to say that as we shared an earnings call two weeks ago we're now you know mentioned that we're probably on number five top five in that market so in mexico so again we we are able to compete successfully against the very best in these markets and uh i think that's something that is exciting for investors to know that we've done i've not able we've been able to do it in multiple markets there are multiple markets in north america you know a market even like a and it was a latin america but even the west virginia market we come in late a year after everybody else launched we don't have any database or any brand awareness there and we're able to grow to become double digit uh share in casino in that market It just shows that I think the quality of what we offer stands above most of our competitors, ultimately, in the players' minds, at least.

Bernie McTernan, Analyst — Needham & Company

Yeah, and you said on the earnings call, but you just reiterated that Mexico is tracking ahead of Colombia right now, which is pretty exciting. But what's working well in Mexico?

Richard Schwartz, CEO

You mentioned the significant competitor, but yeah, we'd love to know more about that. um yeah so we uh have spent a lot of time localizing the registration flows to make sure we reduce friction there's other things that are required by the government there um but the process they regulate us fairly closely so we have to sort of make sure that everything was compliant yet we wanted to make sure that we had all the localization needed so the payment methods the registration flows but ultimately i think what's been nice is that we are a casino first brand there as well and the largest operator caliente really is a sports first brand historically and so i think by us being able to bring a wide variety of games to the market you know they use a supplier there who also builds their own games and so at times maybe they favor the games that are you know available from the supplier where we don't have that same constraints as we're able to offer the greatest variety of games from all suppliers without favoring one versus others which i think is helpful at times um and so at the end of the day I think it just comes down to that we are marketing to an audience a very fun experience that is unique to the players. And again, we've now become better as an organization at communicating what our unique selling points are. But ultimately, we keep stacking new feature after new feature. What's really exciting for Latin America, frankly, is that a lot of the most exciting features we brought to the U.S. market haven't even been launched yet there. And they're actually getting very close to being launched down there. So when we launched some of these new features down there, we would hope that they would have the same positive impact on those businesses that we saw in the U.S.

Bernie McTernan, Analyst — Needham & Company

No, that's great. And so maybe another question that we always get on LADAM, but just taxes in Columbia, can you just maybe a refresh in terms of, you know, where we currently are, what's embedded in the guidance, And is this now a non-issue at this point, or is there still stuff that we should be paying attention to?

Kyle Sauers, CFO

Well, I think it's always important to pay attention. But we certainly do, so we can keep everyone updated. But you'll recall, so last year there was a 19% tax on deposits. There was an emergency decree that ended at the end of the year. that had the effect last year of a lot of extra bonusing, which reduces net revenue relative to GGR. We had very solid player growth and GGR growth last year because we were generous with players and took the brunt of that. Moving into 2026, there was a 19% emergency decree on GGR. that the court overturned in April. They suspended it in January, overturned it in April, said it was not legal. President, in anticipation of that, we believe, put a new 16 percent incremental emergency tax in place in mid-March. So the result of all of that is that we did not have any extra emergency tax for the first two and a half months of the year. We have built into our guidance a 16% tax on GGR from mid-March through the end of the year. The Constitutional Court will review this tax as well, so it has the possibility to be overturned, but for the sake of guidance, we're not including that opportunity. And then there is a presidential election that happens in the coming months here that could also be another opportunity for that tax, emergency tax to go away with a change of administration. That's a possibility. And in any event, this temporary tax goes away at the end of the year. So 16% on a very nicely growing revenue base in Columbia, if it were to go away mid-year or the end of the year, certainly incremental for us for sure.

Bernie McTernan, Analyst — Needham & Company

Okay. Understood. Can we touch on the World Cup? You know, we're about a month away now from from the World Cup starting. What's the opportunity for Rush Street and particularly thinking about, you know, LATAM and Colombia and even Mexico, just the potential, you know, not only player engagement, but revenue opportunity that that brings along with it.

Kyle Sauers, CFO

Yeah, so maybe I'll start and Richard can can chime in where he wants, but it is maybe I'll start with guidance because we've included the extra games because the World Cup, you know, 100-plus games is generally incremental to the world soccer schedule this year. So we've built in a little bit for that, probably not so much, if at all, for the potential for significant player growth that impacts revenue in the back half of the year. So maybe I would start with a reference point of the Copa America, which was two summers ago. Big soccer tournament, but certainly not on the scale of the World Cup. And certainly if you look at ticket prices, it wasn't. But the beauty of this World Cup, as we know, it's all in this region. We've got host cities in markets where we have operations. It's a big event. And there's certainly a revenue opportunity in June and July because of the extra gains, because of the number of people that will be watching and wagering on those games. But really, the bigger opportunity is about long-term player count growth, where COPA, we grew 170% year-over-year player count in June and July. We're off of a much bigger base of players today, but there's a lot of room for us to grow pretty significantly in those player accounts. I'll also say, you know, we had a nice inflection in our casino growth in Columbia post Copa. So bringing on all these players, most of who were there to watch this big, big event that is, that's culturally very exciting. But then to be able to keep them around and cross sell them, in casino or other sports soccer will start back up relatively quickly right or uh and so it's not like the super bowl where the fun has ended in football uh unless you're going to bet on arena um so it is a it's a really big opportunity it's a big opportunity in mexico as well um the the investment has already started for us the the we're we're already using world cup related creative and campaigns. We've got great strategies and assets lined up. You've also got an opportunity in the U.S. where we won't put as much behind it in terms of extra marketing in sports-only markets, but it's because of the relatable nature of this overall event. It's a great way to use that to attract both sports bettors, but also casino players. And then the last piece of that in North America is, in sports, we actually over-index to soccer. We've always had a great soccer product. We trade it really well. You know, we partner with Canby for our risk and odds. And we've always had very deep offering in soccer around the world. So we've built a really nice following of soccer players, or soccer bettors in North America.

Richard Schwartz, CEO

So it's an opportunity all around. um i think we've been modest about the way we've thought about it for guidance uh but if things go uh as well as they possibly could it could it's certainly a source of upside for us this year okay um yeah i'm gonna just be engaged i think this one real quick the fact that's in the same time zone as prime time for all our players across america's is fabulous right it's going to create engagement and of course the fact that they're going to be hosting games in canada mexico us markets we operate in brings an extra level of attention to this event and so we're gonna be able to acquire a large volume of customers and we expect to be able to cross sell them to the other products like casinos kyle mentioned so anyways real excited for the

Bernie McTernan, Analyst — Needham & Company

yeah that's great um and so uh you mentioned canada and i know we only have a couple minutes left here but um launching alberta in july um what's your expectations for you know this market launch, and maybe if you could speak to the shape of A, how competitive do you think it will be maybe relative to the Ontario launch, but then B, just the shape of the investment and when do you think you'd be able to generate positive EBITDA in the province?

Kyle Sauers, CFO

Sure. So when we raised guidance on our call a few weeks ago, we increased the midpoint of revenue by $115 million and the midpoint of EBITDA by $20 million. There's a little bit of revenue built in for Alberta. So we just added Alberta, the impact of Alberta to that guidance. I should be clear on that. So a little bit of that revenue is expected, increases expected to come from Alberta. And we've anticipated kind of a $10 million headwind for the year from Alberta. So that's the investments in the market launch and the marketing player acquisition offset by, you know, some margin generated from that increased revenue. We're going to remain flexible, and if there's opportunities to invest more because things are going well in Alberta, we will certainly do that. As probably everybody has, we've had a lot of learnings from Ontario, so we think we're much better positioned going into this launch versus Ontario. But it'll be competitive, right? There's a lot of players that will launch on day one. There are gray market operators that have significant player bases that we'll try and attract away. And then we're all obviously going to try and grow that market, which certainly happened with Ontario. So it's a good opportunity. I think it'll be slower building. We'll keep everyone updated. I think in terms of profitability, one of the things we've talked about in the past is every iCasino market in North America has been profitable for us by the fourth quarter of operations. So assuming that that trend continues, there's probably a little bit of a headwind in the first half of 2027, but not a whole lot in terms of profitability in that market and then should turn profitable in the back half of the year. So we're very excited about Alberta for sure.

Bernie McTernan, Analyst — Needham & Company

Yeah, no, it makes a lot of sense. Well, I think we're at time there. So gentlemen, thank you so much for all the time this morning. Thanks to everyone for joining us on the webcast and talk to you guys soon.

Kyle Sauers, CFO

Thanks, Brian.