Q4 2024 Rush Street Interactive Inc Earnings Call
Good day, ladies and gentlemen.
Speaker Change: Thank you for standing by. Welcome to the Rush Street Interactive fourth quarter and year end 2024 earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Speaker Change: Please note that this conference call is being recorded today, February 26, 2025. I will now turn the call over to Kyle Sauers, the Financial Officer. You may proceed.
Kyle Sauers: Thank you, Operator, and good afternoon. By now, everyone should have access to our fourth quarter and year-end 2024 earnings release. It can be found under the heading Financials, Quarterly Results, in the Investors section of the RSI website at RushStreetInteractive.com.
Kyle Sauers: Some of our comments will be forward-looking statements within the meaning of the federal securities laws.
Kyle Sauers: 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.
Kyle Sauers: 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.
Kyle Sauers: 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.
Kyle Sauers: In particular, 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,
Kyle Sauers: and other adjustments that are either non-cash or not related to our underlying business performance.
Kyle Sauers: A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is available on our fourth quarter and year-end 2024 earnings release and our Investor Deck, which is available in the Investor section of the RSI website at rushstreetinteractive.com.
Kyle Sauers: 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.
Speaker Change: 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.
Speaker Change: Good afternoon and welcome to our fourth quarter 2024 earnings call.
Speaker Change: I'd like to begin by expressing my gratitude to the entire RSI team for their outstanding efforts.
Speaker Change: Their dedication and hard work have been instrumental in our success.
Speaker Change: I couldn't be more proud of the incredible team we've built over the years.
Speaker Change: Your dedication is a key reason we excel in such a competitive industry.
Speaker Change: As I reflect on our performance in 2024, this has undoubtedly been our best year ever.
Speaker Change: We not only set records in revenue, profitability, cash flow, margins, user accounts.
Speaker Change: and many other key KPIs. But we also made significant advancements in our technology platform, strategic initiatives, and customer-centric experiences.
demonstrating an ability to execute while scaling effectively.
Speaker Change: Most importantly, we believe we have positioned ourselves for success in the years ahead.
Speaker Change: We concluded the year with a record-setting quarter in both revenue and adjusted EBITDA, exceeding the high end of our most recent guidance.
For the year, we grew revenue 34%.
Speaker Change: While this top-line growth was impressive, what stands out was our ability to drive 36% of that growth to the bottom line.
We expand the gross margin by over 200 basis points.
reduced marketing expense compared to last year.
and gained leverage over our G&A costs.
Speaker Change: As a result, we saw an 11 times increase in adjusted EBITDA for the year.
Speaker Change: Our long-term focus and expertise in creating differentiated and high-quality user experiences are paying off.
Speaker Change: We have simultaneously achieved our growth and profitability targets across our entire portfolio.
while increasing contributions from all geographies.
Speaker Change: both iCasino and sports and from both our newer and more mature markets.
Speaker Change: As we take stock of our progress, our focus on three key principles has positioned us for long-term success.
First, our customer-centric approach prioritizes a world-class user experience.
Speaker Change: This is easier said than done. It requires a clear vision, in-house technology, innovative product teams, seasoned operations teams, and deep user insights.
Speaker Change: Our players notice and appreciate how we take care of them, from exceptional customer service and reducing friction in their journey to our unique real-time reward system.
Speaker Change: This proprietary system delights our players in unexpected ways, including offering extra chances to win through fun and engaging in-house developed content that delivers secondary gaming experiences not available elsewhere.
Speaker Change: Second, our continuous investment in in-house technology supports diverse and innovative product features.
Speaker Change: These new features often require a deep understanding of our users and sophisticated development.
Speaker Change: Our commitment to technology will ensure we stay ahead of the curve.
Speaker Change: Third, as evident in our results, we leverage operational efficiency to scale and enhance margins.
Speaker Change: This approach has driven our recent strong results and underscores our commitment to becoming a leader in online gaming across America.
Regarding the quarterly results,
as investors evaluate our performance.
There are a few takeaways worth pointing out.
As referenced earlier, we've experienced broad-based growth.
Speaker Change: Top-line performance was strong once again with strength across products. Both Online Casino and Online Sportsbook each grew over 27 percent.
We are also continuing to experience strength across geographies.
North America online grew 29%. LATAM grew 54%.
Speaker Change: This growth was in the face of player-favorable NFL outcomes in the Q4, reinforcing the consistency and diversification of our revenue streams.
Speaker Change: Underlying these results are strong trends in both player accounts and player values.
Speaker Change: For the fourth quarter, North American mouths were at an all-time company record of 205,000.
up 28% year-over-year, marking another consecutive quarter of accelerating growth.
Art Now in North America increased to $346.
Speaker Change: The fast growth in players, while maintaining our leading art mail level, is a true testament to our underlying strategic focus on user engagement and retention.
Speaker Change: In Latin America, we continued to experience high levels of growth, with our mouths increasing year-over-year by 71% to 348,000.
Speaker Change: This increase highlights the effectiveness of our localized strategies in teams.
and our ability to attract and retain users.
Speaker Change: Our art now in the region was $39. When measured in local currency, this increased both sequentially and year-over-year.
Speaker Change: Our marketing efforts continue to yield positive results, building on the strong foundation laid in previous quarters.
Speaker Change: Our MAO and our MAO trends are being driven by our targeted and data-driven marketing efforts.
Speaker Change: Our campaigns have effectively leveraged a mix of traditional and digital channels, allowing us to reach a broad audience and attract new users at a very solid pace.
Speaker Change: While we've made tremendous improvements in our marketing efficiency over the past couple of years, we continue to improve and find new strategies to maximize effectiveness.
Speaker Change: Overall spend continues to deliver strong results, as evidenced by our continued momentum in mouths and art mouths.
Speaker Change: We are closely monitoring the 2025 legislative sessions in several U.S. states and Canadian provinces for potential online casino legalization and expansion opportunities.
Speaker Change: We cannot predict specific outcomes, but there is a growing recognition that online casino gambling is already happening in these places.
and across the United States and Canada.
through offshore unregulated and unlicensed sites.
Speaker Change: including online sweepstakes casinos that offer real money games that look and feel exactly like regulated sites but pay no taxes and lack player safeguards and protections.
Speaker Change: Regulation is a proven way to protect players and generate significant tax dollars to fund critical government budget initiatives.
like education, health care, and other important programs.
Speaker Change: We remain dedicated to delivering value to our shareholders and providing an unparalleled gaming experience to our users.
Speaker Change: The success we experienced in 2024 sets a strong foundation and we are optimistic about maintaining our strong momentum into 2025.
Speaker Change: Our focus will remain on delivering consistent performance and driving value for our shareholders.
With that, I'll turn the call over to Kyle.
Thanks, Richard.
Speaker Change: Fourth quarter revenue was $254.2 million, up 31% year-over-year, leading to full year 2024 revenue of $924.1 million, up 34% year-over-year.
Speaker Change: Our growth in the quarter and the full year was well balanced across both iCasino and sports and also across geographies.
Speaker Change: In the fourth quarter, gross profit margin increased to 36.5 percent.
Speaker Change: We continued the improvement in our revenue diversity and drove higher revenue growth in our more profitable markets.
Speaker Change: For the full year, gross profit margin was ahead of plan at 35.0%, an improvement of over 200 basis points versus the prior year.
Speaker Change: We achieve sequential improvement in gross margin in each quarter throughout the year.
Speaker Change: For 2025, we expect our gross margins to continue to improve as the revenue mix continues to improve and we execute on cost improvements.
Speaker Change: On the marketing side, we continue to stay disciplined and refine our spend. We are spending more in markets where we see better opportunity for returns, and we will continue to be flexible with those investments.
Speaker Change: In fact, in Q4, we increased marketing spend once again and had our highest spend in the last seven quarters, while importantly still achieving leverage over our marketing spend and delivering another record even a quarter.
Speaker Change: Fourth quarter marketing spend was $43.1 million, or 17% of revenue, compared to 17.8% of revenue last year.
Speaker Change: For the full year, adjusted advertising and promotion spend was $155.8 million, down from $158.4 million last year.
Speaker Change: We see the efficiencies evident in our growing active user count and getting a larger share of wallet from our players, measured by increasing our file.
Speaker Change: Looking ahead to 2025, we expect you'll see continued discipline from our marketing efforts.
Speaker Change: And while we won't be shy about making investments when we see the opportunities,
Speaker Change: We do expect to get incremental leverage over our marketing spend again in 2025. So marketing spend that grows at a lower rate than revenue for the year.
Speaker Change: G&A for the fourth quarter was $19 million, or 7.5% of revenue, compared to 8.4% last year. And then for the full year, it was $74.8 million, or 8.1% of revenue, which compares to 8.8% last year.
Speaker Change: For 2025, we expect to get some modest leverage over our G&A expense and come in less than 8.1 percent.
Speaker Change: Our adjusted EBITDA for the fourth quarter was $30.6 million, reflecting a significant increase of over two and a half times compared to the prior year.
Speaker Change: For the full year, adjusted EBITDA of $92.5 million increased more than 11-fold compared to the prior year.
Speaker Change: In 2024, we made a tremendous leap in obtaining benefits from the increasing scale in our business.
Speaker Change: We were also able to demonstrate a strong flow through from earnings to cash flow, highlighting what we see as a very high quality of earnings.
Speaker Change: We ended the year with $229 million in unrestricted cash and no debt, an increase of approximately $61 million for the year.
Speaker Change: During the fourth quarter, we did not buy back any shares under our repurchase authorization.
Speaker Change: We are initiating full-year revenue and adjusted EBITDA guidance for 2025.
Speaker Change: We currently expect revenue to be between $1.01 and $1.08 billion.
Speaker Change: which represents $1.045 billion at the midpoint, up 13% year over year.
Speaker Change: For the full year 2025, we currently expect adjusted EBITDA to be between $115 million and $135 million, which represents $125 million at the midpoint, up 35% year-over-year.
Speaker Change: Our guidance ranges for revenue and EBITDA include a range of potential business impacts from the recent tax changes in Colombia, with the assumption that the tax lasts through the end of the year.
Speaker Change: As you saw in our 8K from last week, the Colombian president has issued an emergency decree to, among other things, levy a tax on players for deposits made into online betting accounts.
Speaker Change: There is currently a review of the constitutionality of this decree, the applicability of the tax,
Speaker Change: and the temporary time frame over which it can be administered.
Speaker Change: including the court's automatic review that is expected during the next few months, we anticipate several strong legal challenges on constitutionality.
Speaker Change: If the tax were to be repealed or shortened, we would expect to see upside to our guidance ranges.
Speaker Change: In addition to the Columbian tax, other considerations that help bridge the difference between the low and high ends of our revenue and EBITDA guidance
include the growth of the markets that we are in.
Speaker Change: Our ranges of continued success in attracting new and monetizing existing players.
Speaker Change: our varying levels of marketing investment and potential currency movements in our non-US markets.
Speaker Change: And as a reminder, our guidance includes only those markets that are live as of today.
With that, Operator, please open the lines for questions.
Thank you.
Speaker Change: We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question,
Speaker Change: please press star followed by two. Again, to ask a question, press star one, and as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question, and we will pause here briefly as questions are registered.
The first question is from the line of Dan.
Hollitzer with Wells Fargo, you may proceed.
Hey, good afternoon, everyone. Thanks for taking my question.
Thank you.
First, just to follow up on the guidance.
Kyle, you mentioned that it does include.
Speaker Change: Columbia. Is there any way to quantify that, what's being baked in right now?
Speaker Change: And then separately, you know, along the same lines, you know, as you think about that kind of midpoint of 13% revenue growth for 2025, is there any way that you could kind of further unpack that between Latin America and U.S. or even, you know, within the U.S., iGaming and how you think about the growth for 2025? Thanks.
Speaker Change: revenue and EBITDA include the impact of the VAT, assuming that it's in place through the end of the year.
Speaker Change: So we just want to make sure that that's clear, that if the tax were to be reversed or shortened, that that provides upside to both the bottom end and the top end of our guidance.
Speaker Change: When you think about what we've included for Columbia, listen, we're only a few days into this, so we're learning as we go here what the impact might be, and it'll take a while to have all that flesh out.
Speaker Change: At the low end of the guidance, I'd assume that's a pretty bad outcome for Columbia for the year and how it's played out. At the high end of the guidance, it's more around things turning out pretty well there given the circumstances.
Speaker Change: And then when thinking about, you know, the other 85 plus percent of the business on the revenue side, you know, we're expecting growth in almost all of our markets.
Speaker Change: It's certainly an expectation that much more of our absolute growth is coming from markets that include
Speaker Change: iCasino. That's, as you know, that's where we've been putting more of our investment dollars for marketing.
That's where we see higher player values.
Speaker Change: where we offer really great differentiation in the product and obviously continuing to have a lot of success in Q4 and so far here in the start of Q1.
All right, that's helpful. And then just for my follow-up
Speaker Change: Obviously, it's been a pretty heavy headline cycle in terms of taxes and proposed increases for sports betting and iGaming.
Speaker Change: I guess, is your guidance taking in anything along those lines, and I guess more broadly, how do you think about that risk across, you know, the myriad of states that have proposed something in some form, versus maybe the upside risk of a path of legalization for high-damaging in some of these states?
Speaker Change: Yeah, so I'll hit the guidance piece. We have not, outside of Columbia.
Speaker Change: where we've assumed it for the full year, the VAT deposit tax. We've not included other scenarios of tax changes in other markets that we're in. So just like we we do not have included in our guidance
Speaker Change: new markets that might go live sometime later this year. We're also not including any
proposed legislation around taxes, you know, to the extent something
were to be approved and legislated.
Speaker Change: in the future, then we of course consider that for the future guidance, but the guidance we have right now does not include any tax changes. And then I'll let Richard just comment on the landscape.
Richard Schwartz: Sure, yeah, hey Dan. You know, on the subject of tax increases, there's no doubt a substantial tax increase is a near-term setback.
Speaker Change: but we view it as a clear display of the need for states to raise taxes.
Speaker Change: And while states are, you know, looking at online gaming industry to raise funds, it cuts both ways and in some ways, including on a net-net basis, we believe it's actually really beneficial for our industry and for us especially if it accelerates expansion of opportunities.
Speaker Change: and so we know that the legalization of online casino is one of the most attractive and proven options to raise funds.
and let's not forget that 88%
Speaker Change: of the U.S. adult population can play regulated online casino today. It's a large population available for us to sort of be able to work towards legalization efforts. So while in the near term you might have a couple hiccups, ultimately we think that the net-net is positive for us as you start to see...
Speaker Change: The needs for the states accelerate the revenue generation and online gaming can represent a very substantial way for them to achieve their goals.
Thanks. Makes sense. Thanks so much for all the detail.
Speaker Change: The next question is from the line of Ryan Sigdahl with Craig Hallam Capital. You may proceed.
Ryan Sigdahl: Hey, good afternoon guys. Really nice results. I want to stay on Columbia for a minute.
Ryan Sigdahl: I know it's early, I know it's the first few days. Looks like at least one of your competitors is passing on the cost directly to the consumer, to not a lot of fanfare there. Many others are straight out absorbing the cost.
Speaker Change: Rush bet appears to be somewhere in the middle, kind of passing along but offering a VAT bonus to the consumer. I guess thoughts on how you think this is working thus far in the first couple days from retention standpoint, competitive standpoint, and then if you're willing to kind of how much of that cost you think you can mitigate with this strategy.
Speaker Change: I feel really good about our situation and the positiveness because of our technology and the fact that we can do a lot of things with our platform that aren't very common to be able to do from others in terms of segmentation to ensure the proper players are getting the bonusing.
Speaker Change: So I think we have our, the ownership of our own platform provides us with the ability to really be nimble and smart when especially with our bonancing strategies.
Speaker Change: looking out for the players the matter most for our business. So I think it is really early, hard to really get into too much more detail because it's so dynamic and fluid. But I will say that I'm confident we have the best team in the industry down there, and a very top quality platform for the market, which should allow us to manage through this better than our competitors.
Speaker Change: Yeah, maybe just on the mitigation, Ryan, as you pointed out, it's super early. Things are holding up well down there. There's things we've already done immediately. You mentioned some of the different kind of competitive responses to this. So you're right, we're modifying the way that we're handling promotions.
Speaker Change: We, and the rest of the industry, have the ability to reduce marketing spend.
and we're doing some of that.
Speaker Change: and then we look to our vendor partners to help share.
Speaker Change: share in the impact. And we've got a lot of costs that are, you know, variable with revenue. And as Richard pointed out, I think we've got, we feel like we've got
some advantages because of
Speaker Change: owning our own platform, our proprietary bonusing engine and probably allows us to do some things.
Speaker Change: differently than our competitors to excite and retain those players and we're well capitalized. We've got a really strong player-friendly brand down there, so we're optimistic. It'll turn out better than it could, and things are holding up pretty well so far.
Speaker Change: Great. For my second question, I just want to move over to Delaware specifically.
Really impressive results
basically grew almost every month sequentially up.
up triple digits.
Speaker Change: etc. all the way through January of last month. So I guess as you think about that market, it's continuing to outperform. Is 2025 the year of let's continue to lean in and invest and
Speaker Change: in that market, or is it the year where you can start to really drive margin even better? Thanks.
Speaker Change: Yeah, so you're right. I think the data came out for January, not too long ago. We've continued to have...
Speaker Change: really strong sequential growth, as you point out, almost month after month.
Speaker Change: like clockwork and so we're very very very proud of that. You know we reached a TGR run rate over over 125 million in the fourth quarter so and then it grew again in January so we've got a lot of opportunity still there.
and I think from a margin perspective.
Speaker Change: I think our margins are more fixed there from an operating perspective.
Not completely, but fairly fixed.
So it's going to be more about driving
Speaker Change: new players and player monetization, which we think there's a lot of room left to grow there. Obviously, our growth rate in the early part of the year.
Speaker Change: from Delaware is going to be more significant than it's likely to be later in the year, just given the launch date right at the end of 2023. But a lot of opportunities still left there.
Very good. Thanks, guys. Good luck.
Speaker Change: The next question will be a line of David Katz with Jeffries. You may proceed.
David Katz: Evening. Thanks for taking my question. I wanted to just raise the issue of, you know, sweepstakes.
David Katz: getting a lot of discussion, at least among us. Curious what your perspectives on it are, what it can lead to, what impacts it's having, and any thoughts to that end I think would be welcome and helpful. Thanks.
David Katz: Yeah, sure. Hi, David. Yeah, I mean, I referenced it a little bit earlier, but at the end of the day, you have a product that is online casino that looks and feels and plays like a regulated online casino product.
David Katz: that is not regulated, not taxed, not protected, and dominant in the markets around the country right now because there's a free-for-all and a proliferation of a Wild West mentality that I think ultimately it is surprising when you get to some of the land-based casinos opposing...
David Katz: online casino, regulated online casino, you don't hear what efforts are being put into stopping this sort of.
David Katz: Unlicensed activity that's proliferating in their states today. So absolutely it is having an impact despite what everyone can come up with research that Tries to make any point they want but ultimately, you know, it is a product that is trying to circumvent
David Katz: the gaming laws, the gambling laws on a state-by-state level, and I certainly think there should be enforcement to ensure that there's an even playing field for all participants, and to ensure that
David Katz: and properly protect. There's a lot of miners, especially, that are playing on many of those products and I think it's in the industry's interest to ensure that gets enforced.
David Katz: brought into proper regulatory frameworks. And ultimately, this existence of this activity is a really great accelerator in addition to the tax needs of the states to legalize online casino.
David Katz: Online casino gaming is already existing, so might as well tax it and protect consumers. So I think those are really winning arguments in favor of accelerating iGasino legislation to address this current issue that exists.
Speaker Change: Thanks for that. And I wanted to just follow up on the sports betting side. You know, we spend a ton of time talking about the product mix and the different kinds of bet offerings, etc., and their abilities to drive margins. You know, I'd love your updated thoughts on, you know, things such as in-play betting and just general commentary around your product mix.
And that's it for me. Thanks
Speaker Change: sure I mean in play betting is certainly a always known to be a important category of sports betting you see in European markets what every year for
For almost a decade or two you've seen
Speaker Change: improvements, increases in volume and frequency of in-game betting. So, certainly for us, we've invested in that from the very beginning and a lot of the sports that are very fast-paced that appeal really well to in-game betting like soccer and tennis.
Speaker Change: We've really achieved some strong results, and in fact we have some podcasts in that area that really drive a lot of volume of traffic and interest in that category, and we've really targeted that audience, knowing that some of our competitors that focus more on historically on the daily fantasy didn't really have the same sophistication in terms of built up audience.
Speaker Change: in the tennis and soccer category, so we did focus and have focus on that.
Speaker Change: I think product mix is critical, but planar props are also very popular, and as you've also seen from us and the rest of the industry.
Speaker Change: have shown they have some staying power and we put a lot of effort into improving our experience for our players in that area, but a lot of these innovative promotional tools that we have built that are unique to the industry that I referenced earlier as not being available to play anywhere else are really making a difference for us.
Speaker Change: So we're continuing to invest in those types of experiences, knowing at the end of the day the players realize when you're doing something unique and different for them, and they like something you're doing that isn't available anywhere else, they're going to stay loyal with you, and that's what helps drive our player counts and player values.
Thanks very much, appreciate it.
Thanks, David.
Bernie, your line may be muted.
Speaker Change: The next question is from the line of Jed Kelly with Oppenheimer. You may proceed.
Jed Kelly: Hey, great. Thanks for taking my question. I guess, you know, just kind of circling back to New Jersey. Say they do raise taxes, you know, typically with Internet companies.
Speaker Change: When there's a period of like tighter regulation or higher taxes
Speaker Change: you generally see the larger players lean in and market more. So, just given where your market position is in New Jersey, how would we expect under a higher tax scenario?
Speaker Change: you to operate, and would you not want to lean back on marketing? And then just the point on future iGaming, iCasino regulation, it's been a while since we have seen...
Speaker Change: States start to legalize. I mean, can you see any catalysts or anything? You know, we get the budget deficits and meeting revenue But you know, is there anything that's kind of why the pace has been so slow over the past two years? Thanks
Speaker Change: Jeff, maybe I'll take the New Jersey piece first. I think it's it's it's probably too early. I mean we we obviously have a really strong brand in that area of the country. We've built a really solid customer base.
We're well capitalized
I think we're we we have to
Speaker Change: evaluate the situation and look at what's happening with the competition. I don't think this level of tax that's being talked about...
Speaker Change: means you've got to dramatically change the way that you're you're marketing but you you would need to mitigate some of that. So I think it's probably too early for us to say what we do from a competitive standpoint there. I'll let Richard talk about the kind of the
I guess you know what situation. Yeah, sure.
Richard Schwartz: There's more efforts going into this than ever before. If you just listen to the earnings calls from our competitors this week and in prior weeks, you'll see that everyone's focused on it, which is a tremendous difference from where it was a couple of years ago, where you didn't hear anything about efforts to legalize ICUS. You know, it was really all about source cutting.
as the profits from my casino have improved.
Richard Schwartz: and the tax base increased, you're starting to see a lot more focus on this category and so with that you get alignment, groups that are focusing on aligning together in the industry to achieve a result of improving legalization in more markets.
Richard Schwartz: But as I said a few minutes ago, the fact that online content is already happening in every state in the U.S.
Richard Schwartz: And it's not being taxed or regulated or not protecting consumers is a really strong Accelerant accelerant that helps us to sort of make that point why you might as well protect consumers and tax
Richard Schwartz: tax it. I think the fact that you have some improvements happening in efforts in Alberta are making progress.
I think there will be some lunch.
spring legislative session.
co-expected to sort of show some
Richard Schwartz: some progress here and I think there's some positive developments that are happening in this week. So we're looking forward to
Richard Schwartz: Alberta moving forward, but you're starting to see the states, you know, you start to see the cracks in the state budgets where
Richard Schwartz: As a federal government, it's less willing to perhaps fund the states to the level in the past. States are looking for additional ways to generate income and taxes. And as I said, iCasino is a...
Richard Schwartz: incredible way for them to achieve that result and especially for the states that already have forest studying legalized, regulated, very simple add-on. So I think you're going to see a lot more movement in this area perhaps than you have in the last year or two based on those factors.
Speaker Change: Great, that's helpful. And you think that message is starting to resonate with the governors?
Speaker Change: the signs that other states and governors are also looking for ways to increase revenues and this is an easy way to do it.
So I do think that message is
Speaker Change: is starting to percolate, and I think the need for state revenues to increase is more than it has been in the past years.
Great, thank you and nice job.
Speaker Change: Thanks Jeff. The next question is from the line of Chad Bainin with Macquarie. You may proceed.
Hi, good afternoon. Thanks for taking my question.
Speaker Change: Richard, Kyle wanted to ask about M&A opportunities and buybacks. So given the cash that you have.
Speaker Change: at the end of the quarter and the outlook for 25. This will obviously continue to build. Can you kind of help us think about maybe the magnitude of buyback opportunities?
Speaker Change: And if you're not participating there, is it because you're, you know, in the market looking for tuck-in acquisitions on the M&A side? Thanks.
Speaker Change: Sure, Kyle, why don't you take the pie back, then I'll take the M&A part of it. Yeah, so, uh, appreciate the question, Chad. I wouldn't, um, we've, we're...
Speaker Change: I think we're comfortable with our cash position. You're right that cash position should continue to build nicely. I wouldn't correlate our activity
executing our buyback with
Speaker Change: some indication about M&A activity and the timing of that. I think those are, while they ultimately can impact each other, I wouldn't necessarily go to that direct correlation. So, you know, we didn't buy back any stock in the fourth quarter after our authorization. We are going to continue to be opportunistic.
Speaker Change: You know, we'll continue to monitor the situation. I think, you know, despite the near-term...
Speaker Change: headwinds here from this temporary tax in Colombia and obviously came out with
Speaker Change: What we felt like was strong guidance, in particular, in the face of that. We're very confident in the business trends throughout the business, and we're intent on driving shareholder value. So some of that could include returning capital in the form of share buybacks.
Now I'll let Richard talk about the M&A landscape.
Speaker Change: very clear focus on sort of line of sight that we have a You know profitable business in our company. We do have opportunities to improve it in Latin America potentially. We're looking at options full-time opportunities
Speaker Change: Anything that can add value for the shareholders, ultimately having a, you know, 229 million now of unrestricted cash and growing our cash flow, great balance sheet, gives us a lot of flexibility and a lot of options, and our only focus is on what can we do to invest
Speaker Change: this capital to deliver the best return for our shareholders. So we do consider all the M&A options and we have an active team that's always considering different variations and possibilities.
Speaker Change: Great, thank you both. And then on the guidance, not sure if you guys build top-down or bottoms-up, but as we think about the sports betting hold improvements,
getting the product features that continue to drive higher hold.
Is there an expected sports betting hold increase?
Speaker Change: that's implied in your guidance for 25, or are you not building it that way and you're simply, you know, looking at the MAUs and kind of driving, you know, a certain amount of revenue out of those customers? Thank you.
Speaker Change: Sure, thanks. So it's a combination of those and obviously given that we...
Speaker Change: plan and our guidance for a lot of different scenarios. It does include both those. I'll say that we improved sports hold
Speaker Change: in 24. We actually improved our sports hold in Q4 of this year compared to the prior year despite the
Speaker Change: despite the NFL outcomes that we all dealt with. We improved it in...
Speaker Change: as a company in North America and in Latin America so we're pretty pleased with that. There have been a lot of product improvements and mix improvements so we are expecting additional hold improvement in 25 versus 24.
Thanks, Chip.
Speaker Change: The next question is from the line of Jordan Bender with Citizens. You may proceed.
Jordan Bender: Afternoon, everyone. Maybe to just follow up on the on the outlook, you know, the implied flow through for the year in 25 is below what you saw in 24. And from what I understand, Columbia is a pretty variable business model. So that shouldn't hurt too much to the downside. So is there anything to call out in terms of why that's the case? And is it kind of just conservatism baked into the guidance? Thank you.
27% and that compares to what was 36% last year.
And so just maybe to think about last year, 2024.
Jordan Bender: benefited from an actual absolute dollar decrease in marketing spend compared to 2023. And we reduced marketing nicely, but still drove that 34% revenue growth. In 2025...
Jordan Bender: We have plans to increase marketing spend. We still plan to get leverage over the marketing line, but that difference is the primary driver of the flow-through between 2024 and 2025.
Great, thanks.
Speaker Change: So as we see the competitive environment continue to ease around you, are you looking to any states that you're not currently operational as the competitive environment lessens ahead of you?
Speaker Change: Jordan, your question states that we have not entered from a sportsbook-only perspective in the past and are we reconsidering those? Is that the gist of the question?
Speaker Change: Yeah, as the competitive environment in the OSB only states, you're not in SARS-CoV-2 Ease. Does it make it any more attractive for you guys to go operate there?
Speaker Change: So, you know, we have these parameters that we look at for every jurisdiction and, you know, the tax rate, the cost of entry, will iGaming be in the future, likely to be in the future, added. And so those are things that we've looked at in the past. I think looking at a competitive
Speaker Change: Even though you might have a diminished number of competitors in some of these jurisdictions the ones that are actually carrying all the Financial results are still in these markets and continue to invest so I think that you know there are we always look at markets We haven't got in to decide whether we want to go into them but there isn't something that unless we see an outlook change where we think iCasino is going to be
Speaker Change: Sports supermarket coming in late where we don't really see a strategic value longer term for us outside of the sports betting business
Great. Thank you very much.
Speaker Change: Thanks, Jorg. The next question is from the line of Joe Stauf with...
Susquehanna, you may proceed.
Speaker Change: Thank you. Hi there, Richard. Kyle. On the North American growth outlook in 25...
I was curious about how you think about
Speaker Change: User growth versus the growth in ArtML. Is it fair to assume that, you know, you would think that ArtML is going to grow faster than user growth?
and then almost a related topic.
Speaker Change: I was wondering if you can comment, you know, just on the level of penetration, so to speak, within iCasino. It's a pretty finite market right now. You know, you guys have been operating and really doing well in
Speaker Change: all those states, and I'm wondering, you know, is the opportunity set...
Speaker Change: to grow and to expand the penetration rate of adults that really choose to, you know, use iCasino, where are we kind of in that continuum?
Speaker Change: Yeah, so I can start. I think on the Mao versus Art Mao and where's the growth coming from, I'd expect that it's going to be a nice combination of both. I mean, if you look at our player counts...
throughout.
2024.
Speaker Change: I mean, just this last quarter, we grew North America by 28%.
And that was the highest.
Speaker Change: for the year. Now we benefited from Delaware in those numbers throughout the year, but even without Delaware, we would have had accelerating and sequential user counts for, geez, almost the last two years. So even ex-Delaware, we've had really good.
user count growth and
More of that has been in
Speaker Change: iCasino markets than sports markets, so some of it, some of that player value
Speaker Change: And whether it's our mile growth or mile growth, it's going to come down to are we bringing in more casino players than sports players, who are generally more, the casino players being more valuable. So I think there's an opportunity for both of those to be driving the revenue growth and be a nice balance there.
Speaker Change: I guess I could jump in on the maturity of the markets. Every state has a varying level of maturity. Of course, New Jersey was the first, the July casino.
Speaker Change: For us, Delaware has been the most recent one. What you've seen in the European markets, and I grew up in the European markets years ago, is that you have 20 years of growth in these regulated markets, at least, that you saw increases in growth. And you're seeing that here in the U.S. that all the markets are still growing. Even the most mature market, New Jersey, has continued to grow at record rates.
Speaker Change: populations in the States that are going to try it for the first time. So I just think that this industry, as you look back in European markets, you'll see that it's not surprising to me that it's been consistently growing in the U.S. and I would expect that to continue based on my experiences in other European markets prior to the U.S. market opening up.
Speaker Change: Yeah, it feels like all the analysts that have covered this industry have kind of under-putted on their estimates on the TAM, and everyone has to keep raising them, you know, time after time. So maybe everyone's got it right at this point, but it sure seems like there's opportunity for that to continue to grow.
yeah and and I appreciate that response and I
I guess I was wondering, maybe if we could...
Part three of the question is like they're...
Speaker Change: certainly was a re-acceleration in iCasino growth in the second half versus the first half. And I'm wondering if, you know, if you can comment on reasons why you think that is an aggregate, you know, I'll leave it wide open if you could.
Speaker Change: Yeah Joe, I think I mean we just can focus on ourselves and we know that as you've seen we've had tremendous growth and I think we're getting better at everything we're doing.
Speaker Change: releasing great new product features and innovations. And you can see that, and this is really simple at the end of the day. It's about getting player counts, increasing your player counts, and increasing your player values, and we've done both.
Speaker Change: So if you do that, you're going to grow your business nicely, and you do that by offering players a great user experience. And so what we do is we focus on execution and the things that we can control, which is exactly what I described.
Thank you guys.
Speaker Change: There are currently no questions registered. So as a brief reminder, it is star one to ask a question.
Speaker Change: The next question is from the line of David Hornthal with Private.
My apologies.
Richard Schwartz: It looks like the last question was our last question. I would now like to pass the conference back over to Richard for any closing remarks.
Richard Schwartz: Appreciate it. Well, thank you again for joining us today. We look forward to updating you on our progress when we share our first quarter results in the spring.
Richard Schwartz: That concludes today's call. Thank you for your participation and enjoy the rest of your day.