Rush Street Interactive (NYSE:RSI) Beats Expectations in Strong Q1, Stock Jumps 10.9%

Petr Huřťák /
2024/05/01 4:26 pm EDT

Online casino and sports betting company Rush Street Interactive (NYSE:RSI) reported Q1 CY2024 results beating Wall Street analysts' expectations, with revenue up 33.9% year on year to $217.4 million. The company's full-year revenue guidance of $835 million at the midpoint also came in 4.4% above analysts' estimates. It made a non-GAAP profit of $0.03 per share, improving from its loss of $0.08 per share in the same quarter last year.

Is now the time to buy Rush Street Interactive? Find out by accessing our full research report, it's free.

Rush Street Interactive (RSI) Q1 CY2024 Highlights:

  • Revenue: $217.4 million vs analyst estimates of $198 million (9.8% beat)
  • Adjusted EBITDA: $17.1 million vs analyst estimates of $5.7 million (large beat)
  • EPS (non-GAAP): $0.03 vs analyst estimates of -$0.02 ($0.05 beat)
  • The company lifted its revenue guidance for the full year from $800 million to $835 million at the midpoint, a 4.4% increase (above expectations)
  • The company lifted its adjusted EBITDA guidance for the full year from $40 million to $55 million at the midpoint (above expectations)
  • Gross Margin (GAAP): 33.5%, down from 34% in the same quarter last year
  • Monthly Active Users: 176,000
  • Market Capitalization: $508.3 million

Richard Schwartz, Chief Executive Officer of RSI, said, “We are extremely pleased with our record first quarter results achieving company quarterly record Revenues and Adjusted EBITDA of $217 million and $17 million, respectively. This was accomplished by growing both our iCasino and Online Sports businesses by over 35% year-over-year, in large part by acquiring new players more efficiently while simultaneously increasing the number and value of our users. Our team is proud to have achieved these results, which stemmed from our long-standing, unwavering commitment to prioritize the quality of our product and customer experience.”

Specializing in online casino gaming and sports betting, Rush Street Interactive (NYSE:RSI) is an operator of digital gaming platforms.

Gaming Solutions

Gaming solution companies operate in a dynamic and evolving market, and the digital transformation of the gaming industry presents significant opportunities for innovation and growth, whether it be immersive slot machine terminals or mobile sports betting. However, the gaming solution industry is not without its challenges. Regulatory compliance is a crucial consideration as companies must navigate a complex and often fragmented regulatory landscape across different jurisdictions. Changes in regulations can impact product offerings, operational practices, and market access, requiring companies to maintain flexibility and adaptability in their business strategies. Additionally, the competitive nature of the industry necessitates continuous investment in research and development to stay ahead of competitors and meet evolving consumer demands.

Sales Growth

Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Rush Street Interactive's annualized revenue growth rate of 71% over the last four years was incredible for a consumer discretionary business. Rush Street Interactive Total RevenueWithin consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Rush Street Interactive's recent history shows its momentum has slowed as its annualized revenue growth of 20.8% over the last two years is below its four-year trend.

This quarter, Rush Street Interactive reported wonderful year-on-year revenue growth of 33.9%, and its $217.4 million of revenue exceeded Wall Street's estimates by 9.8%. Looking ahead, Wall Street expects sales to grow 7.8% over the next 12 months, a deceleration from this quarter.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefitting from the rise of AI, available to you FREE via this link.

Operating Margin

Operating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Although Rush Street Interactive was profitable this quarter from an operational perspective, it's generally struggled when zooming out. Its high expenses have contributed to an average operating margin of negative 9.1% over the last two years. This performance isn't ideal as demand in the consumer discretionary sector is volatile. We prefer to invest in companies that can weather industry downturns through consistent profitability. Rush Street Interactive Operating Margin (GAAP)

This quarter, Rush Street Interactive generated an operating profit margin of 0.7%, up 14.3 percentage points year on year.

Over the next 12 months, Wall Street expects Rush Street Interactive to shrink its losses but remain unprofitable. Analysts are expecting the company’s LTM operating margin of negative 3.8% to rise to negative 1.7%.

Key Takeaways from Rush Street Interactive's Q1 Results

This was a 'beat and raise' quarter. We were impressed that Rush Street Interactive beat revenue, adjusted EBITDA, and EPS expectations this quarter. We were also that the company lifted full year guidance, which is above expectations for key line items. Zooming out, we think this was a great quarter that shareholders will appreciate. The stock is up 10.9% after reporting and currently trades at $7.1 per share.

Rush Street Interactive may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.