Rush Street Interactive Breaks Records in Latin America Amid New Tax Challenges
On Wednesday, Rush Street Interactive (RSI) unveiled its first-quarter results, showcasing a remarkable 21% year-on-year revenue surge, reaching $262.4 million. This turnaround is notable, as the company moved from a $2.2 million loss in Q1 2024 to a profit of $11.2 million this year.
The quarter also marked a historic milestone for the company, with monthly active users (MAUs) in Latin America hitting 354,000—an all-time high. Even more impressive is that Colombia contributed significantly to this success, despite the recent implementation of a 19% value-added tax (VAT) on online gambling in February.
During the earnings call, CEO Richard Schwartz shared insights on how the company navigated the VAT challenges. Instead of shifting costs to players, RSI opted to use incentives and bonuses to mitigate the tax’s impact. This strategy helped maintain market share in Colombia while keeping gross gaming revenue (GGR) levels near record highs—up by 55% in local currency.
However, CFO Kyle Sauers pointed out that net gaming revenue (NGR) was not meeting expectations in Colombia. He noted a decrease in average revenue per MAU from $44 in Q1 2024 to $36 this year, attributing this slump to the new VAT. “In March, our NGR in US dollars was slightly down year-over-year, and April has shown flat results compared to the previous year,” Sauers said, reflecting the tax’s strain on the business.
Future of the VAT Tax in Colombia: Hope or Hurdle?
The Colombian government introduced the VAT to help manage costs associated with civil unrest in the Catatumbo area. This tax is set to expire at the end of December, but uncertainties linger regarding its potential permanence.
Local attorney Juan Camilo Carrasco remarked that temporary taxes often have a tendency to become permanent. Schwartz highlighted that the constitutionality of the VAT is currently under judicial review, with a decision expected by late May or June.
Despite the uncertainty, RSI maintains a positive outlook and believes the tax could be repealed. If that happens, Sauers noted, it could significantly enhance revenue and EBITDA, pointing to the strong player volumes in Colombia as a promising sign.
Exciting Developments in Mexico and Peru
Beyond Colombia, Rush Street Interactive is optimistic about growth in other Latin American markets, especially Mexico and Peru. In Mexico, the company reported nearly 50% year-on-year growth as it enters its third year in the market. Schwartz expressed excitement over this trajectory, suggesting Mexico could ultimately surpass Colombia in size within the region.
In contrast, in Peru, RSI is taking a cautious, localized approach. The launch of its RushBet brand in July 2024 has been methodical, focusing on optimizing user experience before ramping up marketing efforts. Schwartz conveyed enthusiasm for future opportunities in Peru, given its sizable population.
Expanding Horizons: Future Latin American Markets
RSI’s strategic vision includes expanding into promising markets like Chile, Argentina, Ecuador, and Brazil, as identified in its results presentation. The firm estimates its total addressable market in Latin America could reach an impressive $15.9 billion by 2028.
Schwartz highlighted that expansions require thorough evaluation and proactive planning. “With our strong brand and experienced team, entering new markets will be much more feasible,” he noted.
EBITDA Growth and Future Expectations
In addition to rising revenues and profits, Rush Street Interactive reported a staggering 95% year-on-year growth in adjusted EBITDA, reaching $33.2 million in Q1. This growth took place despite a modest increase in sales and marketing expenses. The company also reported a 17% rise in MAUs in North America, with average revenue per MAU considerably higher at $368.
Looking ahead, RSI reiterated its fiscal outlook for 2025, forecasting revenue between $1.01 billion and $1.08 billion, with adjusted EBITDA anticipated to range between $115 million and $135 million. Schwartz attributed this success to a commitment to innovation and enhancing the player experience, alongside efficient acquisition and retention strategies.
As Rush Street Interactive navigates the complex and evolving landscape of Latin America, it remains poised for growth, driven by strategic initiatives and a clear understanding of market dynamics.