Rush Street Interactive, Inc.

Good day, ladies and gentlemen. 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. Please note that this conference call is being recorded today, February 26, 2025. I will now turn the call over to Kyle Sowers, the financial officer. You may proceed.

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 investor section of the RSI website at rushstreetinteractive.com. Some of our comments will be forward-looking statements within the meaning of the federal securities laws. 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. 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 conditions. 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. 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, and other adjustments that are either non-cash or not related to our underlying business performance. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is available in 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. 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. 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.

Good afternoon and welcome to our fourth quarter 2024 earnings call. I'd like to begin by expressing my gratitude to the entire RSI team for their outstanding efforts. Their dedication and hard work have been instrumental in our success. I couldn't be more proud of the incredible team we've built over the years. Your dedication is a key reason we excel in such a competitive industry. As I reflect on our performance in 2024, this has undoubtedly been our best year ever. We've not only set records in revenue, profitability, cash flow, margins, user accounts, 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. Most importantly, we believe we have positioned ourselves for success in the years ahead. 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%. While this top line growth was impressive, what stands out was our ability to drive 36% of that growth to the bottom line. We expanded gross margin by over 200 basis points, reduced marketing expense compared to last year, and gained leverage over our G&A costs. As a result, we saw an 11 times increase in adjusted EBITDA for the year. Our long-term focus and expertise in creating differentiated and high quality user experiences are paying off. We have simultaneously achieved our growth and profitability targets across our entire portfolio, while increasing contributions from all geographies, both iCasino and sports, and from both our newer and more mature markets. 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. This is easier said than done. It requires a clear vision, in-house technology, innovative product teams, seasoned operations teams, and deep user insights. Our players notice and appreciate how we take care of them. for exceptional customer service and reducing friction in their journey to our unique real-time reward system. 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. Second, our continuous investment in in-house technology supports diverse and innovative product features. These new features often require a deep understanding of our users and sophisticated development. Our commitment to technology will ensure we stay ahead of the curve. Third, as evident in our results, we leverage operational efficiency to scale and enhance margins. This approach has driven our recent strong results and underscores our commitment to becoming a leader in online gaming across the Americas. 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. Top-line performance was strong once again with strength across products. Both online casino and online sportsbooks each grew over 27%. We are also continuing to experience strength across geographies. North America online grew 29%, LATAM grew 54%. This growth was in the face of player favorable NFL outcomes in the Q4, reinforcing the consistency and diversification of our revenue streams. Underlying these results are strong trends in both player accounts and player values. For the fourth quarter, North American MALs were at an all-time company record of 205,000, up 28% year-over-year, marking another consecutive quarter of accelerating growth. ARTMAL in North America increased to $346. The fast growth in players, while maintaining our leading ARTMAL level, is a true testament to our underlying strategic focus on user engagement and retention. In Latin America, we continued to experience high levels of growth, with our MALs increasing year over year by 71% to 348,000. This increase highlights the effectiveness of our localized strategies and teams and our ability to attract and retain users. Our ARPMAL in the region was $39. When measured in local currency, this increased both sequentially and year over year. Our marketing efforts continue to yield positive results, building on the strong foundation laid in previous quarters. Our MAU and our MAU trends are being driven by our targeted and data-driven marketing efforts. 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. 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. Overall spend continues to deliver strong results, as evidenced by our continued momentum in MALs and ART MALs. We are closely monitoring the 2025 legislative sessions in several US states and Canadian provinces for potential online casino legalization, and expansion opportunities. We cannot predict the 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, 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. Regulation is a proven way to protect players and generate significant tax dollars to fund critical government budget initiatives like education, healthcare, and other important programs. We remain dedicated to delivering value to our shareholders and providing an unparalleled gaming experience to our users. But success we experienced in 2024 sets a strong foundation, and we are optimistic about maintaining our strong momentum into 2025. 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. 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. Our growth in the quarter and the full year was well balanced across both iCasino and sports, and also across geographies. In the fourth quarter, gross profit margin increased to 36.5%. We continued the improvement in our revenue diversity and drove higher revenue growth in our more profitable markets. 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. We achieved sequential improvement in gross margin in each quarter throughout the year. For 2025, we expect our gross margins to continue to improve as the revenue mix continues to improve and we execute on cost improvements. 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 turns and we will continue to be flexible with those investments. 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 EBIT a quarter. Fourth quarter marketing spend was 43.1 million or 17% of revenue compared to 17.8% of revenue last year. For the full year, adjusted advertising and promotion spend was $155.8 million, down from $158.4 million last year. We see the efficiencies evident in our growing active user count and getting a larger share of wallet from our players, measured by increasing ARPMIL. Looking ahead to 2025, we expect you'll see continued discipline from our marketing efforts. And while we won't be shy about making investments when we see the opportunities, 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. 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 was $74.8 million or 8.1% of revenue, which compares to 8.8% last year. For 2025, we expect to get some modest leverage over our G&A expense and come in less than 8.1%. Similar to years past, much of the run rate increase in G&A will come in the first quarter as we have our annual compensation adjustments for employees. Our adjusted EBITDA for the fourth quarter was $30.6 million, reflecting a significant increase of over 2.5 times compared to the prior year. For the full year, adjusted EBITDA of $92.5 million increased more than 11-fold compared to the prior year. In 2024, we made a tremendous leap in obtaining benefits from the increasing scale in our business. 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. We ended the year with $229 million in unrestricted cash and no debt, an increase of approximately $61 million for the year. During the fourth quarter, we did not buy back any shares under our repurchase authorization. We are initiating full year revenue and adjusted EBITDA guidance for 2025. We currently expect revenue to be between 1.01 and 1.08 billion, which represents 1.045 billion at the midpoint, up 13% year over year. 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. Our guidance ranges for revenue and EBITDA include a range of potential business impacts from the recent tax changes in Columbia, with the assumption that the tax lasts through the end of the year. As you saw in our 8-K 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. There is currently a review of the constitutionality of this decree, the applicability of the tax, and the temporary timeframe over which it can be administered. Including the court's automatic review that is expected during the next few months, we anticipate several strong legal challenges on constitutionality. If the tax were to be repealed or shortened, we would expect to see upside to our guidance ranges. In addition to the Colombian 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, our ranges of continued success in attracting new and monetizing existing players, our varying levels of marketing investment, and potential currency movements in our non-US markets. 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. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2 again to ask a question. or a 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 Alitzer with Wells Fargo. You may proceed.

Hey, good afternoon everyone. Thanks for taking my question. First, it just evolved on the guidance. Kyle, you mentioned that it does include Columbia, is there any way to quantify that, what's being baked in right now? And then separately, you know, along the same line, 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 US or even, you know, within the US iGaming and how you think about the growth for 2025? Thanks.

Sure. So I'll start with the the Columbia piece, just to make sure it's absolutely clear that both the high and low end of our ranges for revenue and EBITDA include the impact of the VAT, assuming that it's in place through the end of the year. 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. Um, when you think about what we've included for Columbia, listen, we're just, we're only a few days into this. So, um, we were, we're learning as we go here, what the impact might be. And then it'll take a while to, to have all that flesh out, but. And, you know, at the low end of the guidance, um, I'd assume that's a pretty bad outcome for, for Columbia for the year and how it's played out. Um, and at the high end of the guidance, it's, it's more around, uh, things turning out pretty well there, given the, given the circumstances. And then when thinking about the other 85 plus percent of the business on the revenue side, we're expecting growth in almost all of our markets. It's certainly an expectation that much more of our absolute growth is coming from markets that include iCasino. As you know, that's where we've been putting more of our investment dollars from marketing. That's where we see higher player values. 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.

Got it. That's helpful. And then just for my follow-up, obviously it's been a pretty heavy headline cycle in terms of taxes and proposed increases for sports betting and iGaming. I guess, is your guidance baking in anything along those lines? And I guess more broadly, How do you think about that risk across the myriad of states that have proposed something in some form versus maybe the upside risk of a path to legalization for iGaming in some of these states?

Yeah, so I'll hit the guidance piece. We have not, outside of Columbia, 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 do not have included in our guidance 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, you know, in the future, then we'd, 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.

Sure. Hey, Dan. On the subject of tax increases, there's no doubt a substantial tax increase is a near-term setback. But we view it as a clear display of the need for states to raise taxes. And while states are 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. 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% of the US adult population can't play regulated online casino today. It's a large population available Peter Haslund, For us to sort of be able to work towards legalization efforts so well 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. Peter Haslund, The needs for the States accelerate the revenue generation and and online gaming can represent a very substantial way for them to achieve their goals.

Peter Haslund, Thanks makes sense thanks so much for all the detail.

Thanks, Dan. The next question is from the line of Ryan Sigdahl with Craig Hallam Capital. You may proceed.

Hey, good afternoon, guys. Really nice results. I want to stay on Columbia for a minute. So 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. Kyle Bruursema, Rush bet appears to be somewhere in the middle kind of passing along but offering a VAT bonus. Kyle Bruursema, 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 costs, you think you can mitigate with the strategy.

Kyle Bruursema, Sure, I started, maybe you can add on the mitigation element Kyle. Yeah, I mean, the competitors are all trying to determine, like we are, how to manage this most effectively. There's different levels of approaches and sophistications vary. 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. So I think the ownership of our own platform provides us with the ability to really be nimble and smart, especially with our bonusing strategies. I think we've already seen some operators start with one approach and change their approach pretty drastically. And what we're doing is really staying the course and modifying and tweaking and monitoring situations to ensure that we're always looking out for the players that 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're 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.

Yeah, maybe just on the mitigation, Ryan, as you point 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. We and the rest of the industry have the ability to reduce marketing spend, and we're doing some of that. Um, and, and then we'll look to our, our vendor partners to help share, share in the impact. And we've got a lot of costs that are, uh, you know, variable with revenue. And as Richard pointed out, I think we've got, we feel like we've got. Um, some advantages because of, um, owning our own platform, our proprietary bonusing engine, and probably allows us to do some things differently than our competitors to excite and retain those players. And, and we're well capitalized. We've got a really strong player friendly brand down there. So. So we're optimistic. It'll turn out better than it could, and things are holding up pretty well so far.

Great. For my second question, just want to move over to Delaware specifically. So really impressive results. Basically grew almost every month sequentially up, up triple digits, et cetera, 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 in that market, or is it the year where you can start to really drive margin even better? Thanks.

Yeah, so you're right. I think the data came out for January not too long ago. We've continued to have really strong sequential growth, as you point out, almost month after month, like clockwork. And so we're very, very, very proud of that. We reached a GGR run rate over 125 million in the fourth quarter. And then it grew again in January. So we've got a lot of opportunity still there. And I think from a margin perspective, 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 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 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.

The next question is from the line of David Katz with Jefferies. You may proceed.

Good evening. Thanks for taking my question. I wanted to just raise the issue of, you know, sweepstakes, you know, getting a lot of discussion, at least among us. You know, curious what your perspectives on it are, what, you know, what it can lead to, what, you know, impacts it's having, and, you know, any thoughts to that end. I think would be welcome and helpful. Thanks.

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 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 this some of the land-based casinos opposing online casino, regulated online casino, you don't hear what efforts are being put into stopping this sort of 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, it is a product that is trying to circumvent 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 all online casino gameplay is being regulated, taxed, and properly protected. There's a lot of miners, especially, that are playing many of those products, and I think it's in the industry's interest to ensure that gets enforced and 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 because online casino gaming is already existing. So might as well tax it to protect consumers. So I think there's some really winning arguments in favor of accelerating iCasino legislation to address this current issue that exists.

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 sort of product mix and the different kinds of bet offerings, et cetera, 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.

Sure. I mean, in-play betting is certainly always known to be an important category of sports betting. You see in European markets what every year for for almost a decade or two, you've seen 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, we've really achieved some strong results in. 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 historically on the daily fantasy didn't really have the same sophistication in terms of built up audience in the tennis and soccer category. So we did focus and have focused on that. I think product mix is critical, but the player props are also very popular. And as you've also seen from us and the rest of the industry, see them get parlays have kept show. They have some staying power and we put a lot of effort into proving our experience for our players in that area. 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. So we're continuing to invest in those types of experiences, knowing that 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.

Next question is from the line of Bernie McTernan with Needham & Co. You may proceed. Bernie, your line may be muted. The next question is from the line of Jed Kelly with Oppenheimer. You may proceed.

Hey, great. Thanks. Thanks for taking my question. I guess, you know, just just kind of circling about about back to to New Jersey, and say they do raise taxes, you know, typically with internet companies, when there's a period of like tighter regulation, or higher taxes, 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, you to operate and would you would you not want to lean back on marketing and then just the point on you know future i i gaming i casino regulation it's been a while since we have seen states start to legalize i mean can you you see any catalysts or anything you know we get the budgets deficits and needing revenue but you know is there anything that's kind of why the why the pace has been so slow over the past two years thanks

Maybe I'll take the New Jersey piece first. I think it's probably too early. 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. We have to 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 It means you've got to dramatically change the way that you're marketing, but you would need to mitigate some of that. I think it's probably too early for us to say what we'd do from a competitive standpoint there. I'll let Richard talk about the iCasino legislation.

Yes, sure. more efforts going into this than ever before. If you just listen to the earnings calls from our competitors this week and in the prior weeks, you'll see that everyone's focused on it, which is a tremendous difference from where it was a couple years ago, where you didn't hear anything about efforts to legalize iCasino. It was really all about sports betting. As the profits from iCasino have improved and the tax base increased, you're starting to see a lot more focus on this category. And so with that, you get alignment This groups that are focusing on aligning together in the industry to achieve a result of improving legalization and more markets. But as I said a few minutes ago, the fact that online consumer is already happening in every state in the US and it's not being taxed or regulated or not protecting consumers is a really strong accelerant that helps us to sort of make that point why you might as well protect consumers and tax it. I think that fact that you have some improvements happening in uh efforts in alberta have making are making progress i think there'll be some less spring much legislative session uh it's expected to sort of show some some progress here and and i think there's some positive elements that are happening even this week so we're looking forward to uh alberta moving forward but you're starting to see the states you know you start to see the cracks in the in the city in the state budgets where As the federal government is less willing to perhaps fund the states to level in the past, they've been looking for additional ways to generate income and taxes. And as I said, iCasino is an incredible way for them to achieve that result. And especially for the states that already have sports betting legalized, regulated, it's a 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.

Great. That's helpful. And you think that message is starting to resonate with the governors?

I think it's starting to more really now. You're starting to see the pressure. In fact, the pressure, as I said earlier, for states to start to look for gaming to increase the taxes from our industry is sort of 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 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.

Thanks, Judd. The next question is from the line of Chad Beynon with Macquarie. You may proceed.

Hi. Good afternoon. Thanks for taking my question. Richard, Kyle wanted to ask about M&A opportunities and buybacks. So given the cash that you have 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? And if you're not participating there, Is it because you're in the market looking for tuck-in acquisitions on the M&A side? Thanks.

Sure. Kyle, why don't you take the buyback, then I'll take the M&A part of it.

Yeah. I appreciate the question, Chad. 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 on our buyback with some indication about m a activity uh and the timing of that i think those are um while they they ultimately can impact each other i wouldn't necessarily go to that direct correlation so um you know we didn't buy back any stock in the fourth quarter after our authorization um we are going to continue to be opportunistic um you know we'll continue to monitor the situation i think you know despite the near-term headwinds here from this temporary tax in Columbia, and obviously came out with 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. I'll let Richard talk about M&A landscape.

Yeah, I mean, we're actively... assessing and considering options all the time. It's what you have to do in our business. And we have a very clear focus on sort of line of sight that we have a profitable business in our company. We do have opportunities to prove it in Latin America, potentially. We're looking at options, full-time opportunities, anything that can add value for the shareholders. Ultimately, having $229 million now of unrestricted cash and growing our cash flow great balance sheet gives us a lot of flexibility a lot of options and we're our only focus is on what can we do to invest 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 that's all i'll say great thank you both um and then on the 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 that's implied in your guidance for 25, or are you not building it that way and you're simply looking at the MAUs and driving a certain amount of revenue out of those customers? Thank you.

Sure, thanks. So it's a combination of those. And obviously, given that we plan in our guidance for a lot of different scenarios, it does include both those. I'll say that we improved sports hold in 24. We actually improved our sports hold in Q4 of this year compared to the prior year, despite the NFL outcomes that we that we all dealt with. We improved it 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, Kyle. Nice quarter, guys.

Thanks, Jeff.

The next question is from the line of Jordan Bender with citizens. You may proceed.

afternoon, everyone. Maybe to just follow up 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, you know, is it kind of just conservatism baked into the guidance? Thank you.

Yeah, thanks, Jordan. So it's a good point. You know, the midpoint of our guide this year flow through is around 27%, and that compares to what was 36% last year. And so just maybe to think about last year, 2024 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, 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. And then a lot of the outlooks from your competitors include commentary around promotions continuing to come down. 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.

Jordan, is 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?

Yeah, as a competitive environment in the OSB only states you're not in starts to ease. Does it make it any more attractive for you guys to go operate there?

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 landscape, you start to see that 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. I think that we always look at markets. We haven't got 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 accelerated in that jurisdiction or there's an opportunity, I don't think it's going to raise the level opportunity that we have in front of us because we have George Munro, So many other great opportunities ahead of us, we can't get to them all, including all the Latin American markets that we have opportunities in so we're not going to just sort of chase a sports market coming in late where we don't really see a strategic value longer term for us outside of the sports betting business.

George Munro, Great Thank you very much.

George Munro, Thanks George. The next question is from the line of Joe Stauff with. George Munro, Busquehanna you may proceed.

Thank you. Hi there, Richard. Kyle. On the North American growth outlook in 25, I was curious about how you think about user growth versus the growth in ArtMal. Is it fair to assume that you would think that ArtMal is going to grow faster than user growth? And then almost a related topic, I was wondering if you can comment just on the level of penetration, so to speak, within iCasino. It's a pretty finite market right now. You guys have been operating and really doing well in all those states, and I'm wondering, is the opportunity set 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?

Yeah, so I can start. I think on the Mao versus Art Mao and where is 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, I mean, just this last quarter, we grew North America by 28%, and that was the highest quarter for the year. Now we've benefited from Delaware in those numbers throughout the year, but even without Delaware, we would have had accelerating and sequential user counts for almost the last two years. So even ex-Delaware, we've had really good user count growth, and more of that has been in I casino markets than sports markets. So some of it, some of that player value and whether it's art mile growth or mile growth, it's going to come down to, um, are we, are we bringing in more casino players than sports players? Uh, who are generally more casino players being more valuable. Um, so I think there's an opportunity for both of those, uh, to be driving the revenue growth and be a, be a nice, a nice balance there. Um,

I guess I could jump in on the maturity of the markets. You know, every state has a varying level of maturity. Of course, New Jersey was the first to do iCasino, and, you know, for us, Delaware has been the most recent one. So 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 consistent growth. And you're seeing that here in the U.S. that all the markets are still growing. Even the most mature markets in New Jersey have continued to grow at record rates. So I think what you'll see is that there's a large population that hasn't tried iGaming in many markets. And over time, as everything else becomes more digitalized, you get more people willing to try and embrace the benefits of digital gaming. You still see the land-based casinos still maintain their revenues, but you start to see the states benefit even more from the increased iGaming player bases that will play both online and land-based, and those players will also only be digital. But you always also grow an audience every year by people getting to become the proper age to gamble. It's a new class of of people every year. And on top of that, you just have a larger number of existing populations in the States that are going to try for the first time. So I just think that this industry, as you look back in European markets, you'll see that it has, 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. Yeah.

It feels, it feels like all the analysts that have covered this industry, um, 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 I appreciate that response. And I guess I was wondering, maybe if we could, you know, part three of the question is, like, there certainly was a reacceleration 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.

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, releasing great new product features and innovations. And you can see that, But, and this is, this is really simple at the end of the day, it's about getting player accounts, increasing your player accounts and increasing your player values. And we've done both. 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 we do is we focus on execution and the things that we can control, which is exactly what I described.

Thank you guys.

There are currently no questions registered. So as a brief reminder, it is star one to ask a question. The next question is from the line of David Hornthal with private. My apologies. 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.

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.

That concludes today's call. Thank you for your participation and enjoy the rest of your day.