Rush Street Interactive (RSI) released its third-quarter 2022 report yesterday, posting revenue of $148 million — a 20% year-over-year gain as compared to the $122.9 million it earned in the same period last year.
Q3 earnings for the parent company of BetRivers and SugarHouse, which offer legal sports betting in 16 different states and the Canadian province of Ontario, came in just below consensus estimates of $156.1 million, while the Q3 earnings per share of $0.09 similarly underperformed analysts' expectations of $0.13 EPS.
The company also reported that third-quarter adjusted EBITDA saw a loss of $12.5 million, virtually identical to the $12.2 million loss recorded in Q3 2021. EBITDA results for Q3 2022 similarly showed a net loss of $22.7 million, compared to a net loss of $18.9 million during the same quarter of 2021 — but considerably below the $43 million in losses sustained in the first quarter of 2022.
Sportsbook losses were down approximately 50% to $5 million, a further sign of the company moving towards what the gaming industry likes to describe as an "inflection point" — the transition from loss to profit.
Company set to achieve profitability in second half of 2023
In the conference call that followed the release of the earnings report on Wednesday, RSI CEO Richard Schwartz described the results as being indicative of a "solid third quarter" and reiterated his company's guidance that it will enter into profit in the second half of next year.
"We made fantastic progress towards our profitability goal of being EBITDA positive for the back half of 2023 through a combination of solid revenue growth, disciplined marketing spend, improving gross margins and modest growth in our corporate G&A costs," said Schwartz.
He also chalked up roughly one-third ($6 million) of the company's third-quarter loss to an abnormally low online casino hold rate and foreign currency fluctuations, but the Rush Street CEO was also keen to tout the company's positives.
"Looking at adjusted EBITDA, we posted negative $12.5 million, a considerable improvement compared to last quarter's negative $18.6 million," said Schwartz. "We remain profitable in the six markets of New Jersey, Pennsylvania, Michigan, Illinois, West Virginia, and Colombia."
One of the most important takeaways from the earnings call was the company's superior performance in markets where RSI offers both a sports betting site and an online casino.
"In terms of activity, we continue to see very strong volumes in markets where we operate both online casino and sports betting, as we are able to execute on the enhanced profitability offered by the online casino vertical in these markets," said Schwartz. "We are seeing strong results from both Colombia and Ontario and we are excited to begin increasing marketing efforts in Mexico."
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Schwartz also points to strong Ontario results
"Internationally, our efforts [in] Ontario are progressing very nicely," emphasized Schwartz. "The fact that this is an online casino and sports betting market plays to our strength — this was the first full quarter of being live and we are pleased with our ramp and overall market share.
Schwartz was particularly pleased with how well the BetRivers brand has performed in Ontario, since being part of that market's official launch in April, and has now achieved a 7% market share for its online casino offering and 2% for online sports betting.
"Given the number of competitors in the market and the advantage some of our competitors began with in terms of existing high brand awareness and access to online player databases, we are pleased with the success and hope to continue to build upon that in the quarters to come," added Schwartz.
Sportsbook results improve due to lower customer acquisition/retention costs
Following in the path of Caesars and other sportsbooks that have cut back on promotional spending, RSI has reduced its customer acquisition costs after two years of heavy marketing for states launches.
Schwartz cited his company's increasing use of YouTube as a lower-cost means of "building brand awareness" and gaining customers — Rush Street produced 126,000 hours of content in October alone, which resulted in 2.7 million views of its podcasts via its BetRivers Network.
"Everybody... across the industry has dug in deeper. We have a lot more information in markets as they mature than we did a year ago or, or two years ago," said Schwartz. "Our behavior hasn't changed all that much. What you're seeing with the prudent spending in marketing is a reflection of us measuring the value that we get from what we spend."
Schwartz also acknowledged that it's a reflection of exiting a period with a "significant number of new market launches." Dating back to Q4 2021, RSI launched in Arizona, Connecticut, New York, Louisiana, and Ontario.
"I mean, that's a long list of big launches where money was being put to work," said Schwartz. "Are we buying or acquiring players at cheaper rates than we were at some of those periods of time? For sure."
