Rush Street Interactive - Third Quarter 2026 Earnings Call - RUSH STREET INTERACTIVE INC

Explicit Guidance:

• FY2026 Revenue: Reiterated range of $1.56 billion to $1.6 billion (Year-over-Year growth of 38% to 41%).
• FY2026 Adjusted EBITDA: Reiterated range of $245 million to $265 million (Year-over-Year growth of 59% to 72%), including a $4.3 million one-time foreign currency gain.
• FY2026 Outlook Trends (October): Revenue trends tracking toward the low end of guidance; Adjusted EBITDA trends tracking near the midpoint.
• FY2026 Tax Assumptions: Guidance assumes the temporary 16% excise tax in Colombia remains in place through year-end; assumes no new tax legislation in 2027.
• Share Repurchases: Anticipate continuing opportunistic share repurchases under the existing $100 million program, with $75 million remaining capacity as of quarter-end.

Business-Segment Outlook:

• Online Casino: Remains the core growth driver (75% of revenue); expects continued meaningful opportunities for growth despite Q3 moderation in pace.
• Online Sports: Growth expected to continue, though subject to fluctuation; Q3 revenue grew 70% YoY.
• Latin America: Expects continued healthy performance in Colombia, Mexico, and Peru; revenue grew >200% YoY in Q3.
• Canada (Alberta): Views market as a meaningful long-term opportunity; revenue development expected to be gradual; First-time depositors and DAUs tracking >2x Ontario launch levels on a population-adjusted basis.
• Colombia Tax Impact: Temporary 16% excise tax (effective Q1 2026) represented ~$7 million in costs over 2.5 months; expects tax to revert to 15% in 2027 pending confirmation.
• Product Mix: Cross-sell to online casino from World Cup acquisitions driving "outsized growth"; online casino players drive higher retention and lifetime value.

Market and Competitive Outlook:

• North America iCasino: Growth moderated in Q3 due to broader industry slowdown; expects growth rates to fluctuate month-to-month but maintains confidence in long-term fundamentals.
• Market Share: Expects to continue growing share in North America year-over-year, excluding Michigan where competitive intensity from new entrants (e.g., DraftKings, Hard Rock) is higher.
• U.S. Expansion Opportunities (2027):
  • Virginia: Expected near-term opportunity if companion bills pass in 2027.
  • Ohio: Monitors closely for potential path forward.
  • D.C.: Monitoring for online casino legislation at year-end.
  • Indiana: Favorable political backdrop for legalization in 2027.
  • Illinois & New York: High fiscal pressure expected from 2027/2028 due to potential Medicaid funding reductions; anticipates increased state interest in online casino revenue.
• Brazil: Views current ban as a unique regulatory risk; monitors potential competitor reallocation of spend from Brazil to other LATAM markets.
• Competition: Monitoring "gray market" and sweepstakes proliferation; notes that competition in regulated markets is increasing.

Macro / Industry Outlook:

• Economic Drivers: Anticipates state fiscal pressures (tax revenue needs, Medicaid restrictions) will catalyze online casino legalization.
• Regulatory Environment:
  • Colombia: 16% excise tax is an emergency decree scheduled to expire at year-end 2026; no new taxes approved in 2027 budget.
  • Prediction Markets: CFTC appears to be moving away from supporting casino-style gaming within prediction markets, which is viewed as a positive catalyst for regulated online casino legislation.
  • Global LATAM: Colombia (pro-business admin), Mexico (strengthening enforcement), Peru (healthy performance).
• Seasonality: Expects prime season (fall/winter) to drive activity due to climate and sports calendar; iCasino historically rebounds after short-term slowdowns.
• Player Behavior: Newer cohorts have lower expected values (ARPPU/ARPA) than historical cohorts as markets mature; expects growth to rely on player count expansion rather than value per user in NA.

Strategic Initiatives:

• First-Party Games: Investing in proprietary game studio and in-house remote game server; roadmap includes future launches of differentiated games to improve margins and player preference (currently revenue is almost entirely partner-sourced).
• Marketing Strategy: Increased marketing spend in H2 2026 due to attractive acquisition costs; expects operating leverage on marketing line in 2027 with spend growth slower than 2026 (absent new market launches).
• M&A: Continuing to evaluate opportunities for market entry acceleration in the Americas and complementary technologies to bring capabilities in-house; monitoring industry valuation changes.
• Product Innovation: Evaluating inclusion of "digital cards" or "RIPs" features in a legal, regulated manner to meet consumer demand for alternative products.

Risks and Headwinds to Outlook:

• Market Slowdown: North American iCasino growth has decelerated; industry share shifts and competitive intensity (e.g., Michigan) pose risks to growth rates.
• Regulatory Uncertainty: Potential new tax legislation in Colombia; political uncertainty in Brazil; potential failure of 2027 U.S. state legalization bills.
• Player Valuation: Declining average player value (ARPPU) in North America as markets mature and acquisition costs rise relative to lifetime value.
• Competitor Behavior: Uncertainty regarding how global competitors will reallocate spend following the Brazil ban.
• Seasonality/Event Effects: Possibility that World Cup activity "pulled forward" spend from August/September, potentially causing temporary softness in Q4.

Management Tone on the Future:

• Confidence: High confidence in long-term fundamentals, margin expansion, and the ability to grow market share despite near-term volatility.
• Resilience: Belief that iCasino is a "highly profitable" category that has historically bounced back from short-term slowdowns.
• Strategic Stance: "Dynamic" approach to marketing spend (leaning in or pulling back based on market specifics); emphasis on execution and efficiency over cost-cutting.
• Optimism: Positive outlook on the U.S. legislative cycle for 2027 driven by state fiscal needs; optimistic on LATAM stability compared to Brazil.

Miscellaneous:

• Balance Sheet: Strong cash position of $382 million (as of Sept 30); debt-free status maintained.
• One-Time Items: $4.3 million G&A gain from favorable FX conversion of Colombian pesos (excluded from underlying margin guidance).
• Hold Rates: Sports hold varied significantly by month (July favorable to house, Sept player-friendly); iCasino hold generally stable.