Rush Street Interactive’s Q1 Earnings Report Could Enhance Acquisition Appeal

Are you in the market for an online gambling company? Rush Street Interactive (RSI) stockholders might want to talk to you. After the company shared the surprisingly good news in its first quarter earnings report for 2023, you might want to talk to them, too.

RSI beat its earnings estimate for the quarter and improved upon nearly all its pertinent metrics over the past year. Recent actions by the company suggest that it might be close to discovering an element that has proven most elusive for US online gambling companies: actual profit.

Rush Street Interactive Q1 2023 earnings details

In summation, the first quarter of 2023 wasn’t just good for Rush Street Interactive. It was better than most people outside of the company expected. According to a press release from RSI, the GAAP (Generally Accepted Accounting Principles), earnings highlights included:

• $162.4 million in revenue, up 20% from the same period in 2022
• A net loss of $24.5 million, down almost 47% from Q1 2022

Additionally, the release stated a couple of figures outside the GAAP realm.

• The adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) loss for the quarter came to $
  8.7 million, a decrease of almost 80% year-over-year
•  Marketing expenses were reduced to $49.4 million, about $17 million less than that expense for the same quarter 0f 2022

Zacks Research was among those to respond positively to the news. According to Zacks, RSI’s earnings per share (EPS) for the quarter came to -$0.08, besting a consensus estimate of -$0.12. Also, in Q1 2022, the EPS loss was $0.24.

On the strength of this news, RSI closed at $3.16 per share on the New York Stock Exchange Wednesday. That price and RSI’s restraint in the market and approach to potential profitability could turn acquisition rumors into acquisition talks.

A takeover might be down RSI’s current path

In January 2022, Howard Jay Klein posited for Seeking Alpha that RSI could be an attractive acquisition target. Among the reasons that Klein gave was that “RSI is the right size.” Recent events could make that, even more, the case.

In March, the Connecticut Lottery and RSI announced a mutual parting. RSI’s PlaySugarHouse Sportsbook has provided both physical and online sports betting operations for the Connecticut Lottery since its launch in October 2021.

Additionally, RSI passed on the opportunity to apply for a Massachusetts sports betting license. While it’s difficult to say with certainty without seeing the company’s books, one way to read these moves is that the company is focusing on the markets that give it the best return.

That contingent of markets represents some attractive opportunities for a potential buyer. RSI products (BetRivers and PlaySugarHouse) already contend in the three biggest US online casino markets of Michigan, New Jersey, and Pennsylvania.

Looking to the future, RSI also has a presence in New York and makes its headquarters in Illinois. Both of those states saw bills to legalize real-money online casino games this year. Furthermore, the company expects to be profitable later this year according to CEO Richard Schwartz.

CNN Business shares that “10 analysts offering 12-month price forecasts for” RSI “have a median target of” $6.50 per share for its stock. Thus, even a multiplier of that price could represent a great deal for a potential buyer.

RSI could represent a turn-key solution with a proprietary platform, presence in the most desirable markets, and a disciplined approach to growth that could be had for under $15 a share.

If you’re holding RSI stock today, don’t be surprised if you’re called to vote on a takeover sometime over the next year.