RSI Q1 2025 Earnings Call Transcript

Rush Street Interactive reported Q1 revenue of $262.4 million, up 21% year over year, with adjusted EBITDA nearly doubling to $33.2 million and gross margin improving 125 bps to 34.9%. The company reaffirmed full-year 2025 guidance for $1.010 billion-$1.080 billion of revenue and $115 million-$135 million of adjusted EBITDA, while continuing to offset Colombia’s 19% VAT with higher bonusing that is pressuring net revenue in that market. Share repurchases remained active, with about 734,000 shares bought around $10.35-$10.55 and roughly $42 million left on the authorization.

Analysis

RSI’s quarter is less about headline growth and more about mix shift: the company is proving it can monetize higher-value users without a proportional step-up in acquisition spend. That matters because the market tends to underwrite these names on revenue growth alone, but the real inflection is operating leverage from better product economics and tighter marketing efficiency. The risk is that Colombia temporarily masks the underlying earnings power, creating a false debate about “slowing” growth when the core engine is actually accelerating.

The biggest second-order effect is competitive pressure in LatAm. By absorbing Colombia’s VAT through bonusing, RSI is effectively forcing rivals to choose between share loss and margin compression; that’s usually a winner-takes-more setup for the operator with the best retention loops and lowest CAC. If the tax rolls off, the operating leverage could snap back faster than consensus expects because the company has already preserved engagement, so the upside is not just the tax removal itself but the unwind of promotional drag.

The market may also be underestimating how much of the North American growth runway is now coming from mature iCasino states rather than one-off launch effects. Delaware normalization will slow the reported growth rate, but the more important signal is that higher-margin markets are carrying the mix, which should support EBITDA even if top-line comp gets choppier in Q2/Q3. Alberta is an out-of-consensus call option: if regulation advances, RSI has early-mover credibility in a market likely to favor established omni-channel operators over opportunistic entrants.

Contrarian view: the stock likely deserves a premium to peers if Colombia is treated as a temporary distortion, but the consensus may be too comfortable with the timing of the tax unwind. A longer-than-expected VAT regime would keep revenue growth looking decelerated for multiple quarters and could cap multiple expansion, especially if investors anchor on sequential Q2/Q3 softness rather than annualized EBITDA power.

Key Decisions for Investors

• Long RSI into any post-earnings weakness below the market’s implied growth-rate fear; target a 3-6 month horizon where Colombia tax normalization can re-rate EBITDA leverage. Risk: if VAT persists through year-end, multiple expansion stalls.
• Buy RSI Jan-2026 call spreads to express upside from a Colombia tax unwind and Alberta optionality while limiting downside if Q2/Q3 growth decelerates. Best risk/reward if entered on pullbacks after guidance-driven selling.
• Pair trade: long RSI / short a slower-growth online gaming peer with weaker iCasino exposure and less operating leverage. The trade should work if investors continue rewarding margin expansion over raw revenue growth.
• Use RSI strength to take profits only after a clear catalyst on Colombia court timing; absent that, the stock still has a free option on regulatory upside with cash-backed buybacks supporting the downside.
• Watch for a tradeable re-rating if management confirms VAT relief before late May/June court decisions; that would be a near-term catalyst for a sharp estimate revision and 15%-20% upside window over 1-2 quarters.