RSI Q1 Earnings Call: Growth in Online Casino Offsets Colombia Tax Headwinds

Online casino and sports betting company Rush Street Interactive (NYSE: RSI) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 20.7% year on year to $262.4 million. On the other hand, the company’s full-year revenue guidance of $1.05 billion at the midpoint came in 0.8% below analysts’ estimates. Its non-GAAP profit of $0.09 per share was 42.7% above analysts’ consensus estimates.

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StockStory’s Take

Rush Street Interactive’s first quarter results reflected continued expansion in its core online casino and sports betting businesses, with management emphasizing the success of player acquisition and engagement strategies. CEO Richard Schwartz attributed the quarter’s performance to balanced growth in both verticals, highlighting markets like Michigan and Delaware for their substantial year-over-year gains. Management also noted that its approach of targeting high-value players while maintaining efficient marketing spend contributed to improved profitability and operating margins.

Looking ahead, management reaffirmed its full-year revenue and EBITDA guidance, but cautioned that comparisons will become more challenging as the year progresses. The company expects temporary headwinds from the newly implemented value-added tax (VAT) on Colombian player deposits to continue, though this could reverse if the tax is removed. CFO Kyle Sauers explained, “If the temporary tax goes away prior to year-end, we could see meaningful upside to both revenue and EBITDA.” Management also pointed to ongoing legislative developments in Alberta and other jurisdictions as potential contributors to future growth.

Key Insights from Management’s Remarks

Rush Street Interactive’s Q1 performance was shaped by disciplined marketing investment, product differentiation, and geographic expansion. While growth was broad-based, management acknowledged the impact of temporary regulatory changes and evolving competitive dynamics in international markets.

• Online casino outperformance: Management cited 25% year-over-year growth in online casino, underpinned by product enhancements and cross-sell initiatives that increased player engagement and retention, especially in Michigan and New Jersey.
• Colombia VAT tax impact: The temporary 19% VAT on deposits in Colombia led RSI to increase bonusing in order to retain players, which compressed net revenue despite strong gross gaming revenue growth. Management noted this approach matched competitors’ strategies to preserve market share.
• Delaware market ramp: Delaware delivered over 80% revenue growth year-over-year in its first comparable quarter since launch, with management expressing optimism about the state’s long-term gross gaming revenue potential despite expectations for slower growth as comparisons toughen.
• Marketing efficiency gains: Marketing spend increased only 3% while monthly active users grew 17% in North America and 61% in Latin America, reflecting improved targeting and lower acquisition costs. Management attributed this to focusing resources on high-return markets and ongoing refinement of player acquisition techniques.
• Poker as cross-sell tool: Management launched poker in Pennsylvania as an amenity to drive engagement across other verticals. RSI plans to expand this multi-state liquidity model, using poker to attract new players and encourage cross-play with casino and sports betting products.

Drivers of Future Performance

Management expects continued growth in online casino, ongoing marketing efficiency, and regulatory developments to drive results through year-end. However, headwinds from the Colombia VAT tax and maturing markets are expected to moderate the growth rate in coming quarters.

• Colombia tax uncertainty: The temporary VAT on Colombian deposits is expected to remain a headwind for revenue and EBITDA until at least late spring or early summer, depending on the outcome of a constitutional court review. Management said the removal of this tax would be a “meaningful driver” for both metrics.
• Market maturation effects: As new markets like Delaware lap their launch period, management anticipates slower year-over-year growth rates, which will affect reported results for the remainder of the year. However, established iCasino states remain key contributors.
• Legislative expansion opportunities: Management is closely monitoring legislative progress in Alberta and other North American jurisdictions, indicating that successful legalization efforts could provide new growth avenues in 2026 and beyond.

Top Analyst Questions

• Bernie McTernan (Needham & Company): Asked if RSI believes it is gaining market share in Colombia despite absorbing the VAT tax. Management stated that while exact figures are unavailable, their growth in gross gaming revenue suggests possible share gains.
• Jordan Bender (Citizens): Inquired about operational adjustments in Colombia to improve net gaming revenue. Management described ongoing refinements, such as reducing deposit turnover and monitoring competitor bonusing strategies.
• Jed Kelly (Oppenheimer): Pressed for details on the sustainability of marketing leverage given increased competition. CEO Richard Schwartz emphasized the company’s focus on user experience and product differentiation to maintain acquisition efficiency.
• Chad Beynon (Macquarie): Sought clarification on the growth outlook for Delaware and other international markets. Management expects Delaware growth rates to moderate but sees long-term upside, while Mexico continues to ramp ahead of initial expectations.
• Mike Hickey (Benchmark Company): Asked how cross-sell between casino and sports betting is being promoted. Management highlighted new features that ease player movement between verticals, though they did not disclose the exact proportion of dual-vertical users.

Catalysts in Upcoming Quarters

In the months ahead, the StockStory team will be watching (1) the resolution of Colombia’s temporary VAT tax and its impact on net revenue, (2) signs of continued marketing efficiency and player growth as markets mature, and (3) legislative developments in Alberta and other North American jurisdictions that could expand the company’s addressable market. The pace at which poker liquidity expands across states and the effectiveness of cross-sell initiatives will also serve as important indicators.

Rush Street Interactive currently trades at a forward P/E ratio of 37.2×. In the wake of earnings, is it a buy or sell? See for yourself in our free research report.

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