Rush Street Interactive, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Rush Street Interactive fourth quarter and full year 2025 earnings conference call. 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 17th, 2026. I will now turn the call over to Kyle Sowers, president and chief financial officer. Thank you. You may go ahead.

Thank you, operator, and good afternoon. By now, everyone should have access to our fourth quarter and full year 2025 earnings release. It can be found under the heading Financials Quarterly Results in the Investors 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 condition. 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. 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 are not related to our underlying business performance. A RECONCILIATION OF THESE NON-GAP MEASURES TO THE MOST DIRECTLY COMPARABLE GAP MEASURE IS AVAILABLE IN OUR FOURTH QUARTER AND FULL YEAR 2025 EARNINGS RELEASE AND OUR INVESTOR BANK WHICH IS AVAILABLE IN THE INVESTOR SECTION OF THE RSI WEBSITE AT RUSHSTREET INTERACTIVE DOT COM. FOR PURPOSES OF TODAY'S CALL AND LESS NOTED OTHERWISE WHEN DISCUSSING PROFITABILITY EBITDA OR OTHER INCOME STATEMENT MEASURES OTHER THAN REVENUE WE'RE REFERRING TO THOSE ITEMS ON A NON-GAP 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 and full year 2025 earnings call. I want to begin by expressing my profound gratitude to the entire RSI team for delivering what can only be described as an extraordinary year. Their dedication, innovation, and relentless focus on excellence and delivering exceptional results have been the driving force behind our success. I couldn't be more proud of what we've accomplished together. As I reflect on our performance in 2025, this has been a record year, hitting new highs across virtually every metric. We continue to set new records in revenue, profitability, cash flow, and user counts, as well as other core KPIs. In 2025, without the benefit of any new markets, we achieved record revenue of $1.13 billion, representing 23% year-over-year growth and exceeding the high end of our raised guidance range. Even more impressive, we grew adjusted EBITDA by 66% year-over-year to a record of $153.7 million. also exceeding the high end of our raised guidance and demonstrating the powerful operating leverage inherent in our business model. In 2025, we also materially grew the bottom line with net income of $74 million compared to $7.2 million in 2024. What makes these results particularly compelling is their consistency and breadth. This strong performance is evident across all geographies and product verticals. Our player engagement remains exceptionally strong, as evident by record-setting monthly active users in 2025. In North America, our mouths grew 37% year-over-year in the fourth quarter to over 278,000, including an impressive 51% in online casino markets. Not to be outdone, in Latin America, we grew miles 47% to over 493,000, demonstrating impressive growth and resilience amongst temporary tax headwinds. When discussing the strength of our 2025 results, we're frequently asked about the secret that is driving our accelerating growth and profitability. What is the magic bullet that's driving our success? The answer is there isn't one single factor that is responsible for our success. Our exceptional performance is a product of our intense focus on our customers and the cumulative improvements we've made across every aspect of our business. Over the past several years, we've systematically enhanced our capabilities throughout the entire customer journey. We've advanced our customer acquisition strategies, diversifying our marketing channels and optimizing each one to reach the right customers at the right time with the right message. We've reduced friction in our user experience, making it easier for players to discover, engage with, and enjoy our platform. We've invested heavily in enhancements to our loyalty programs and retention strategies, creating more personalized experiences that we believe keep players coming back. These improvements span every touchpoint with our players. From the moment they first discover our brand to their ongoing relationship with us. We've also enhanced our data analytics capabilities, allowing us to make more informed decisions about player preferences and behaviors. We've improved our customer service operations, ensuring that every interaction reinforces our commitment to player satisfaction. And we've continuously innovated our product offerings to create unique differentiated experiences that players won't find elsewhere. Throughout 2025, we also continue to invest in the operational excellence and technological innovation that differentiate our platform. These innovations aren't only about technology. They're about understanding what our players want and delivering experiences that exceed their expectations. Our focus on customer centricity drives everything we do, from product development to customer service to marketing strategy. The result of these cross-functional improvements is a virtuous cycle. Stronger customer acquisition brings in higher quality players. Improved retention keeps players better engaged, and enhanced experiences drive increased player value. When you execute well across all these areas simultaneously, the cumulative impact is significant and yields sustainable growth. Our casino first strategy continues to be a fundamental differentiator of our business. While we maintain a growing and profitable sports betting business, our focus on leading with online casino has positioned us uniquely in the market. This strategic focus has proven particularly valuable in 2025. Our North American online casino markets continue to drive exceptional growth, as stated earlier, with mouths increasing 51% in the fourth quarter, representing our second highest quarterly growth rate during the past four and a half years, and impressively achieved on a much larger player base and without the benefit of new market launches. What's even more encouraging is that in each successive quarter of 2025, We saw the continued acceleration of year-over-year growth in monthly active users in our North American online casino markets. Our casino-first approach allows us to focus our resources and expertise where we believe that we can create the greatest value. Online casino players typically demonstrate higher lifetime values, better retention rates, and more consistent engagement patterns compared to sports-only customers. By prioritizing these markets and continuously improving our casino experience, we've been able to drive both growth and profitability simultaneously. In fact, in 2026, in support of our Casino First strategy, we plan to increase our investments in developing differentiated casino content and online casino legalization efforts. Another significant accomplishment of 2025 with our successful navigation of the challenging tax environment in Colombia, one of our core LATAM markets. I'm proud to report that not only did we successfully manage through this period, but we're confident that we gained market share from our competitors, setting ourselves up for continued success. Our approach in Colombia was measured and strategic. Rather than immediately passing the VAT tax costs onto our players, we absorbed much of the tax impact through adjusted bonusing strategies, which inherently reduced revenue. This allowed us to maintain player engagement and loyalty while still attracting a significant number of new customers. The results speak for themselves, but despite a temporary drop in net revenue last year, for the full year, we achieved annual GGR growth of 66% and increased mouths by 34%. looking ahead the temporary back tax that was in place during 2025 is now expired there was a new emergency decree issued in late december 2025 along with associated tax degrees that were issued for 2026. this structure has a more traditional but lesser impact on our business as a tax on revenue rather than tax for deposits which we offset in 2025 through higher bonuses However, this emergency tax decree was suspended less than a month after it was issued in late January 2026 by the Constitutional Court and will be under further review in the months ahead. This is a positive step towards recalibrating to the previous and what we view as the more appropriate tax structure in Columbia. Our experience in Columbia demonstrates our ability to navigate regulatory changes while maintaining our focus on long-term player relationships and market leadership. Now I want to briefly address the topic of prediction markets, which has been highly topical in recent industry discussions. At RSI, we're constantly evaluating the evolving industry landscape. Prediction markets today are primarily benefiting from sports event contracts, which is not an area of high priority for us. We will continue to monitor developments in the event contract space And in the meanwhile, continue to focus on executing our proven casino first strategy and delivering exceptional experiences in our current markets while capitalizing on significant growth opportunities ahead of us. As we look to 2026 and beyond, we have tremendous confidence in our growth trajectory and strategic positioning. We're particularly excited about our upcoming launch in Alberta, where the regulatory environment is progressing toward a launch timeline that could occur in the coming quarters. sooner than we were anticipating during our last earnings call. This represents a significant opportunity for us to leverage our success in other North American online casino markets, particularly given our strong performance in Ontario and our established and growing brand recognition across Canada. Beyond Alberta, we continue to evaluate additional expansion opportunities in both North America and Latin America. The success of our selective, disciplined approach to market entry has enabled us to achieve strong returns on our investments while building sustainable competitive positions. We will continue to prioritize markets where we can deploy our full suite of gaming offerings and create meaningful value for both players and shareholders. The 2026 calendar is also filled with marquee international sporting events, such as the current Winter Olympics and the upcoming World Cup. We are well positioned to capitalize on these multinational events across both our sports betting and online casino products. Overall, 2025 was a transformational year for RSI. We demonstrated the power of our business model, the effectiveness of our strategic approach, and the dedication and execution abilities of our team. We've built a strong foundation for expected continued growth while maintaining the operational discipline that has driven our success. We're excited about the opportunities ahead and confident in our ability to continue delivering strong results for our shareholders while providing industry-leading experiences for our players. We have a clear path forward, strong financial resources, and a team that is executing at the highest level. With that overview, let me turn the call over to Kyle to walk through our detailed financial results and provide guidance for 2026. Thanks, Richard. I'm excited to walk you through what was truly an outstanding fourth quarter and full year 2025 with record-breaking performance. Fourth quarter revenue of $324.9 million, up 28% year over year, set another record high and marks our 11th consecutive quarter of sequential revenue growth. Full year 2025 revenue of $1.13 billion grew 23% compared to 2024, exceeding the high end of our raised guidance range. This strong top line performance was driven by exceptional user growth and engagement across our platform. Our gross margins during the fourth quarter were 34.4%, reflecting the continued shift we've made to higher margin markets. For the full year, our gross margins were 34.6% in line with the prior year. On the expense side, we continue to drive operating leverage through our disciplined approach. Marketing expenses in the quarter were $45.4 million, an increase of 5% year-over-year and 14% of total revenue. For the full year, marketing expenses were $158.4 million, representing a 2% year-over-year increase and 14% of total revenue. Compared to the full year, 2024, marketing spend as a percentage of revenue decreased by 290 basis points. This demonstrates our team's ability to continue to optimize our acquisition channels and improve our player acquisition costs while simultaneously growing our player base and hitting new records for first-time depositors each of the last three quarters. G&A for the fourth quarter was $22.3 million or 6.9% of revenue compared to 7.5% in the prior year period. For the full year, G&A was $81 million or 7.1% of revenue compared to 8.1% in 2024. This reflects our continued investment in technology, personnel, and infrastructure to support our growth while maintaining operational leverage. Fourth quarter adjusted EBITDA of 44.1 million set a new quarterly record and increased 44% year over year. Full year adjusted EBITDA reached 153.7 million, an impressive 66% increase year over year, above the high end of our raised estimates and reflects our disciplined approach to growth and operational efficiency. The foundation of our financial success continues to be our exceptional user acquisition and retention performance. In the fourth quarter, North American mouths grew 37% year over year to 278,000 total users. What's particularly impressive is our performance in North American online casino markets, where mouths grew 51% year over year in Q4, which represents our second highest quarterly growth rate during the past four and a half years. And again, achieved on a much larger base of players. In Latin America, we delivered equally strong results with mild growth of 47% year-over-year in Q4, reaching 493,000 total users. This growth demonstrates the strength of our platform, operations, and brand recognition across the region, even as we have navigated the challenging tax environment in Colombia. North American ArtMail declined 5% year over year, which reflects the healthy and expected dilution that comes along with our exceptional growth in user volumes. When you're growing your player base at the rates we've achieved, some ArtMail compression is not only expected, but confirms that we're successfully attracting large volumes of new players to our platform, who initially have lower ArtMail than established players. The key is that we're acquiring these players efficiently and retaining them effectively, which positions us for strong, long-term value creation. In Q4, Latin America ARPMAU was down 21% year-over-year, due largely to the extra bonusing in Colombia. However, Q4 player values in Colombia were at their highest point of the last three quarters, validating the continued strength in our user experience. ARPMAU should return to meaningful year-over-year growth in LATAM with the removal of our VAT bonusing strategy as of the end of last year. Breaking down our performance by geography and product, we saw strength across all segments. North American online casino continue to be our primary growth drivers, benefiting from our strategic focus on these higher value markets. Our sports betting business also contributed meaningfully to our results, growing consistently throughout the year. In the fourth quarter, online casino revenues grew 30% and grew 28% for the full year. Online sports betting revenue grew 20% in the fourth quarter and grew 7% for the full year. Regionally revenue in North America grew 29 percent in the fourth quarter and grew 25 percent for the full year. Revenue in Latin America grew 17 percent in the fourth quarter and grew 12 percent for the full year. Of note all these growth rates include the burden of the extra Columbia bonusing that stopped at the end of 2025. As Richard previously mentioned the tax situation in Columbia remains dynamic. Let me provide more detail and discuss the implications for 2026 in our guidance. The temporary 19% VAT tax on deposits that impacted us throughout much of 2025, which was implemented through an emergency decree, expired at the end of the year, as we expected. Under a new emergency decree, a new tax was implemented for 2026 for the 19% VAT on revenue. Compared to the tax on deposits that we navigated in 2025, this tax on revenue will have less of a punitive impact on our business from a profitability perspective. However, the Constitutional Court of Columbia suspended the emergency decree and associated decreed taxes at the end of January. The result of this review should be concluded in the next few months, and we're optimistic that it will be resolved in our favor. In any event, we expect the additional tax to be paid for the month of January before the suspension occurred. And given the dynamic nature of this situation, for the purposes of our guidance, we assume that this new 19% tax on revenue will be in place for the full year 2026. This new tax environment, combined with the market share gains we achieved in 2025, positions us well for strong growth in Columbia and across Latin America. Our balance sheet remains strong, with $336 million in cash on hand at the end of the year. NET OF STOCK REPURCHASES, WE GENERATED 142 MILLION OF CASH DURING 2025. OUR CASH GENERATION CAPABILITIES HAVE IMPROVED DRAMATICALLY AND WE EXPECT TO CONTINUE BUILDING OUR CASH RESILITION THROUGHOUT 2026. DURING THE FOURTH QUARTER, WE DID NOT REPURCHASE ANY SHARES UNDER OUR PREVIOUSLY ANNOUNCED $50 MILLION SHARE REPURCHASE PROGRAM, WHICH HAS APPROXIMATELY 42 MILLION REMAINING. As we look ahead to 2026, our guidance philosophy reflects both confidence in our business momentum and prudent assumptions about market dynamics. There are some key growth drivers that influence our 2026 outlook. First, we expect continued strong performance in our North American online casino markets, which have shown consistent acceleration throughout 2025. Second, the incrementally improved tax environment in Columbia should allow us to capture more of the strong underlying growth in that market and although not included in guidance, our anticipated launch in Alberta, as well as other potential new markets, provide additional upside. For 2026, we expect revenue in the range of $1.375 billion to $1.425 billion, representing growth of 21% to 26% year over year. We expect adjusted EBITDA in the range of $210 million to $230 million, representing growth of 37% to 50% year over year. When it comes to cadence throughout the year, we would generally expect both revenue and EBITDA to improve as the year progresses, similar to what we've seen in years past. Regarding other line items in our financials and where we'll see leverage, gross margins should improve modestly in 2026 compared to 2025. We continue to improve our cost structure drive revenue growth faster in higher margin markets, but are absorbing the impact of some higher gaming taxes, including the 19% emergency decreed tax on revenue in Columbia. We have continued to get more efficient with marketing spend, which gives the opportunity to keep increasing investment in this area. So we expect meaningful increases in marketing spend in 2026, but at a rate slower than our expected revenue growth, driving leverage across that line item. Regarding G&A, we continue to see opportunities to improve the product, improve our player experience, and explore new opportunities. So we expect G&A to grow more closely in line with our revenue growth. This guidance reflects our confidence in the underlying strength of our business while incorporating prudent assumptions about market maturation and competitive dynamics. We believe this positions us to continue delivering strong shareholder returns while investing appropriately in innovation and long-term growth opportunities. And with that, operator, please open the line for questions.

Of course. We will now begin the question and answer session. If you'd 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, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using speakerphone, please remember to pick up your handset before asking a question. Our first question comes from the line of Dan Pulitzer with JPMorgan. Dan, your line is now open.