Executive Summary / Key Takeaways

• Rush Street Interactive (RSI) is demonstrating robust and accelerating growth, particularly in its high-value North American online casino markets, achieving record revenues and Adjusted EBITDA.
• The company's proprietary technology platform and player-first approach are key differentiators, driving efficient customer acquisition, strong retention, and industry-leading average revenue per monthly active user (ARPMAU).
• Strategic leadership enhancements, including Kyle Sauers' promotion to President and CFO, are sharpening RSI's focus on innovation, operational excellence, and online casino legalization efforts.
• Despite temporary headwinds from the Colombian VAT tax and intense competition, RSI's disciplined marketing and operational efficiency are yielding significant operating leverage and strong cash flow generation.
• Future growth is anticipated from continued expansion in existing markets, new market entries like Alberta, and the potential for accelerated online casino legalization in the U.S., driven by states' budget needs and the proliferation of unregulated gaming.

The Digital Frontier: RSI's Strategic Foundation in Online Gaming

Rush Street Interactive, Inc. (RSI), founded in 2012, has established itself as a prominent online gaming and entertainment company, primarily focused on online casino and sports betting across the U.S., Canadian, and Latin American markets. The company's mission is to engage and delight players through friendly, fun, and fair betting experiences, underpinned by transparency, fairness, and a deep appreciation for customer loyalty. This player-centric philosophy, coupled with continuous investment in its proprietary technology, forms the bedrock of RSI's competitive strategy.

RSI operates under its BetRivers, PlaySugarHouse, and RushBet brands, offering a comprehensive suite of real-money online casino games, online sports betting, and retail sports betting services. Its social gaming platform also serves as a strategic marketing tool, building customer databases and facilitating cross-sell to real-money offerings. The company's operational footprint spans 16 U.S. states and four international markets, including Canada, Colombia, Mexico, and Peru.

The online gambling industry is characterized by intense competition, rapid technological evolution, and a complex, evolving regulatory landscape. Major direct competitors include DraftKings , Flutter Entertainment (TICKER:FLUT, via FanDuel), Caesars Entertainment (CZR), and MGM Resorts (TICKER:MGM, via BetMGM). These rivals often leverage extensive marketing budgets, broad brand recognition, or integrated land-based operations. However, RSI differentiates itself through its deep operational efficiency, regional expertise, and a technology-first approach that prioritizes a superior user experience.

Technological Edge: Fueling Engagement and Efficiency

RSI's core competitive advantage lies in its proprietary technology platform, which underpins its ability to deliver unique gaming experiences. This in-house technology allows for rapid innovation, enabling RSI to offer features and functionalities that often surpass those of competitors relying heavily on third-party solutions. The tangible benefits of this technological differentiation are evident in several key areas.

The platform's sophisticated bonus engine and real-time rewards system are designed to delight players with unexpected incentives, fostering strong customer loyalty and retention. This directly contributes to RSI's industry-leading average revenue per monthly active user (ARPMAU), which in North America stood at $365 in Q3 2025. The company's ability to efficiently acquire new players, even setting a new record for first-time depositors in Q3 2025 at attractive customer acquisition rates, is a testament to its data-driven marketing efforts and the appeal of its differentiated product.

RSI's commitment to innovation extends to payment solutions, as demonstrated by its recent launch of the gaming industry's first integrated debit payments solution at BetRivers, in partnership with Sightline Payments. Additionally, the integration of BurraPay for crypto payments highlights the company's proactive approach to reducing player friction and enhancing transaction efficiency. These advancements aim to improve the player experience and reduce operational costs over time.

Recent R&D initiatives include the launch of a multi-state poker platform with shared player pooling across four states. This strategic move positions poker as a valuable amenity that supports cross-sell and engagement with RSI's casino and sportsbook offerings. The platform's unique functionality encourages fluid cross-play, allowing poker customers to engage with other verticals without leaving the poker table. This focus on integrated, seamless experiences is a direct outcome of RSI's in-house technology and its "so what" for investors is a higher lifetime value per customer through increased engagement across its product suite.

Financial Momentum: Records and Operating Leverage

RSI's strategic focus on high-value online casino markets and technological differentiation has translated into impressive financial performance and significant operating leverage. The company has achieved ten consecutive quarters of sequential revenue growth, culminating in a record $277.9 million in revenue for the third quarter of 2025, a 20% increase year-over-year. This growth was primarily driven by strong player acquisition and engagement in higher-value markets.

For the nine months ended September 30, 2025, revenue reached $809.5 million, up 21% from $669.9 million in the same period of 2024. Online casino and online sports betting revenue contributed $804.5 million to this total, growing 21% year-over-year, while social gaming added $3.7 million, up 12.6%. Retail sports betting revenue, however, decreased to $1.3 million from $2.0 million in the prior year period.

Profitability has seen a dramatic improvement. Adjusted EBITDA for Q3 2025 surged 54% year-over-year to $36 million, representing a 13% margin and demonstrating the significant operating leverage inherent in RSI's business model. For the nine months ended September 30, 2025, Adjusted EBITDA was $109.5 million, a substantial increase from $61.9 million in the prior year period. This strong flow-through from revenue to profitability underscores the quality of RSI's revenue streams and operational efficiency.

Gross profit margins have also shown consistent improvement, reaching 34.0% in Q3 2025. This reflects a favorable shift in revenue mix towards higher-margin markets. Marketing expenses for Q3 2025 were $39.0 million, a 1% decrease year-over-year, even as North American Monthly Active Users (MAUs) increased 34% year-over-year to 225,000. This efficiency highlights RSI's ability to acquire and retain players at attractive rates, with marketing spend representing less than 14% of revenue in Q2 2025. General and administrative expenses remained well-controlled at 7.3% of revenue in Q3 2025, decreasing 3% year-over-year to $25.7 million, primarily due to lower share-based compensation.

Liquidity remains robust, with $273 million in unrestricted cash and no debt as of September 30, 2025. Net cash provided by operating activities for the nine months ended September 30, 2025, increased by $15.4 million to $95.9 million, driven by higher net income. The company's strong cash generation provides significant flexibility for organic growth investments and potential strategic opportunities. While a Tax Receivable Agreement (TRA) liability of $124 million (including $1.1 million current) exists, reflecting future tax benefits, these payments are only made as actual tax savings are realized.

Strategic Initiatives and Forward Outlook

RSI's strategic roadmap is clearly defined, focusing on accelerating growth in high-value online casino markets, leveraging its proprietary technology, and expanding its geographic footprint. The recent promotion of Kyle Sauers to President and CFO, and Rob Picard to Chief Strategy Officer, is designed to enhance operational excellence and free Richard Schwartz, CEO, to focus more deeply on innovation, online casino legalization, and strategic growth opportunities.

The company is actively monitoring legislative developments for online casino legalization, particularly in Alberta, Canada, where it anticipates launching when the market opens. This represents a significant online casino opportunity, building on RSI's proven success in similar markets like Ontario, which grew 24% in Q3 2025. In the U.S., states facing budget pressures and recognizing the tax generation success of online casino are creating momentum for further legalization. The proliferation of unregulated sweepstakes products also strengthens the case for regulated online casino expansion, as states seek protected revenue streams and consumer safeguards.

For the full year 2025, RSI has raised its guidance, now expecting revenue between $1.1 billion and $1.12 billion, representing a 20% year-over-year increase at the midpoint of $1.11 billion. Adjusted EBITDA is projected to be between $147 million and $153 million, up 62% year-over-year at the midpoint of $150 million. This guidance assumes the temporary VAT tax in Colombia remains in effect through year-end and includes only currently live markets. Management anticipates continued marketing leverage, with expenses growing at a lower rate than revenue, and modest leverage over G&A.

Looking ahead to 2026, the outlook for Colombia appears more favorable. Regardless of whether the temporary VAT tax expires or becomes permanent (leading operators to reduce bonusing), RSI expects a beneficial scenario due to the cessation of the current bonusing strategy and easier year-over-year comparisons. The company also sees Mexico as a significant long-term growth market, with revenue growing over 100% in Q3 2025, and expects it to eventually surpass Colombia in size.

Risks and Competitive Dynamics

Despite its strong performance, RSI operates in a dynamic and competitive environment with inherent risks. Intense competition from larger, well-funded players like DraftKings (DKNG) and FanDuel (FLUT), who often have broader brand recognition and aggressive marketing strategies, remains a significant challenge. While RSI's proprietary technology and efficient customer acquisition help mitigate this, its smaller scale compared to some rivals could lead to higher customer acquisition costs in certain markets.

Regulatory risks are also prominent. The temporary 19% VAT tax in Colombia, while currently absorbed through bonusing, has negatively impacted net revenue, causing it to be down 27% in Q3 2025 despite Gross Gaming Revenue (GGR) growing over 50%. The potential for increased gaming taxes in other jurisdictions, such as Mexico (where the gaming tax is likely to increase from 30% to 50%), could also pressure profitability. The legal status of prediction markets is being debated, and while RSI, as a casino-first company, sees less direct competitive risk, it monitors these developments closely to ensure an even playing field.

The proliferation of unregulated sweepstakes products presents both a challenge and an opportunity. These untaxed and unregulated offerings compete with legal online casinos, but their existence also strengthens the argument for states to legalize and regulate online casino gaming, which would benefit RSI. Economic downturns, inflation, and reduced consumer discretionary spending could also adversely affect customer engagement and revenue.

RSI's strategic response to these competitive forces involves a disciplined approach to market entry, prioritizing iCasino-led markets due to their higher player value and retention. Its focus on in-house technology allows for rapid adaptation and differentiation, such as its unique real-time rewards system and innovative payment solutions. By leveraging its regional expertise, particularly in Latin America, and its commitment to a superior player experience, RSI aims to carve out and expand its market share against larger, more generalized competitors.

Conclusion

Rush Street Interactive stands as a compelling investment opportunity within the rapidly evolving online gaming sector. The company's consistent record-breaking financial performance, driven by accelerating growth in high-value online casino markets, underscores the effectiveness of its player-first approach and proprietary technology. Strategic leadership enhancements and a clear roadmap for innovation and market expansion, particularly in Alberta and other potential iCasino states, position RSI for sustained long-term growth.

While challenges such as the temporary Colombian VAT tax and intense competitive pressures persist, RSI's disciplined operational execution, efficient marketing, and robust balance sheet provide a strong foundation. The company's ability to generate significant operating leverage and positive cash flow, coupled with its strategic focus on technological differentiation and advocating for regulated online casino expansion, reinforces its competitive strength. Investors should recognize RSI's proven ability to execute its strategy, capitalize on emerging opportunities, and deliver shareholder value through its unique blend of innovation and operational excellence.