Rush Street Interactive Inc
For the period ended Mar 31, 2024. Filed May 2, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 2, 2024
Extracted filing text, with the paragraph anchors used by the comparison.
See the whole filing, with its images and exhibitsContents
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except for share and per share data)
| March 31,2024 | December 31,2023 | |
|---|---|---|
| (Unaudited) | ||
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | $191,156 | $168,330 |
| Restricted cash | 3,160 | 2,647 |
| Players’ receivables | 13,488 | 10,516 |
| Due from affiliates | 20,592 | 33,471 |
| Prepaid expenses and other current assets | 18,426 | 13,651 |
| Total current assets | 246,822 | 228,615 |
| Intangible assets, net | 77,906 | 74,874 |
| Property and equipment, net | 8,213 | 8,611 |
| Operating lease assets | 1,191 | 1,276 |
| Other assets | 7,258 | 5,204 |
| Total assets | $341,390 | $318,580 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||
| Current liabilities | ||
| Accounts payable | $25,716 | $32,347 |
| Accrued expenses | 64,621 | 51,131 |
| Players’ liabilities | 41,759 | 42,135 |
| Current deferred royalty liabilities | 1,728 | 1,712 |
| Current operating lease liabilities | 589 | 621 |
| Other current liabilities | 19,871 | 9,747 |
| Total current liabilities | 154,284 | 137,693 |
| Non-current deferred royalty liabilities | 11,956 | 12,395 |
| Non-current operating lease liabilities | 620 | 673 |
| Other non-current liabilities | 2,084 | 1,690 |
| Total liabilities | 168,944 | 152,451 |
| Commitments and contingencies (Note 12) | ||
| Stockholders’ equity | ||
| Class A common stock, $0.0001 par value, 750,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 79,543,611 and 72,387,409 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | 8 | 7 |
| Class V common stock, $0.0001 par value, 200,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 145,384,310 and 150,434,310 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | 14 | 15 |
| Additional paid-in capital | 199,911 | 192,163 |
| Accumulated other comprehensive loss | (72) | (100) |
| Accumulated deficit | (139,044) | (138,317) |
| Total stockholders’ equity attributable to Rush Street Interactive, Inc. | 60,817 | 53,768 |
| Non-controlling interests | 111,629 | 112,361 |
| Total stockholders’ equity | 172,446 | 166,129 |
| Total liabilities and stockholders’ equity | $341,390 | $318,580 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except for share and per share data)
| Three Months EndedMarch 31, | ||
|---|---|---|
| 2024 | 2023 | |
| (Unaudited) | (Unaudited) | |
| Revenue | $217,428 | $162,361 |
| Operating costs and expenses | ||
| Costs of revenue | 144,523 | 107,154 |
| Advertising and promotions | 38,404 | 49,940 |
| General and administrative | 25,868 | 21,592 |
| Depreciation and amortization | 7,101 | 5,755 |
| Total operating costs and expenses | 215,896 | 184,441 |
| Income (loss) from operations | 1,532 | (22,080) |
| Other income | ||
| Interest income, net | 1,559 | 380 |
| Income (loss) before income taxes | 3,091 | (21,700) |
| Income tax expense | 5,300 | 2,800 |
| Net loss | $(2,209) | $(24,500) |
| Net loss attributable to non-controlling interests | (1,482) | (17,240) |
| Net loss attributable to Rush Street Interactive, Inc. | $(727) | $(7,260) |
| Net loss per common share attributable to Rush Street Interactive, Inc. – basic and diluted | $(0.01) | $(0.11) |
| Weighted average common shares outstanding – basic and diluted | 76,027,427 | 65,260,064 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands)
| Three Months EndedMarch 31, | ||
|---|---|---|
| 2024 | 2023 | |
| (Unaudited) | (Unaudited) | |
| Net loss | $(2,209) | $(24,500) |
| Other comprehensive income | ||
| Foreign currency translation adjustment | 101 | 344 |
| Comprehensive loss | $(2,108) | $(24,156) |
| Comprehensive loss attributable to non-controlling interests | (1,416) | (16,997) |
| Comprehensive loss attributable to Rush Street Interactive, Inc. | $(692) | $(7,159) |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands except for share data)
| Class ACommon Stock · Class VCommon Stock · Additional Paid-inCapital · AccumulatedOtherComprehensiveLoss · AccumulatedDeficit · TotalStockholders’EquityAttributableTo RSI · Non-ControllingInterests · TotalStockholders’Equity | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Shares · Amount · Shares · Amount | ||||||||||
| Balance at December 31, 2023 | 72,387,409 | $7 | 150,434,310 | $15 | $192,163 | $(100) | $(138,317) | $53,768 | $112,361 | $166,129 |
| Share-based compensation | 2,106,202 | — | — | — | 2,979 | — | — | 2,979 | 5,446 | 8,425 |
| Foreign currency translation adjustment | — | — | — | — | — | 35 | — | 35 | 66 | 101 |
| Issuance of Class A Common Stock upon RSILP Unit Exchanges | 5,050,000 | 1 | (5,050,000) | (1) | — | — | — | — | — | — |
| Net loss | — | — | — | — | — | — | (727) | (727) | (1,482) | (2,209) |
| Allocation of equity and non-controlling interests upon changes in RSILP ownership | — | — | — | — | 4,769 | (7) | — | 4,762 | (4,762) | — |
| Balance at March 31, 2024 (Unaudited) | 79,543,611 | $8 | 145,384,310 | $14 | $199,911 | $(72) | $(139,044) | $60,817 | $111,629 | $172,446 |
| Class ACommon Stock · Class VCommon Stock · Additional Paid-inCapital · AccumulatedOtherComprehensiveLoss · AccumulatedDeficit · TotalStockholders’EquityAttributableTo RSI · Non-ControllingInterests · TotalStockholders’Equity | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Shares · Amount · Shares · Amount | ||||||||||
| Balance at December 31, 2022 | 65,111,616 | $6 | 155,955,584 | $16 | $177,683 | $(1,648) | $(120,012) | $56,045 | $134,829 | $190,874 |
| Share-based compensation | 702,759 | — | — | — | 2,330 | — | — | 2,330 | 5,345 | 7,675 |
| Foreign currency translation adjustment | — | — | — | — | — | 101 | — | 101 | 243 | 344 |
| Issuance of Class A Common Stock upon RSILP Unit Exchanges | 1,500,000 | 1 | (1,500,000) | (1) | — | — | — | — | — | — |
| Net loss | — | — | — | — | — | — | (7,260) | (7,260) | (17,240) | (24,500) |
| Allocation of equity and non-controlling interests upon changes in RSILP ownership | — | — | — | — | 1,565 | (47) | — | 1,518 | (1,518) | — |
| Balance at March 31, 2023 (Unaudited) | 67,314,375 | $7 | 154,455,584 | $15 | $181,578 | $(1,594) | $(127,272) | $52,734 | $121,659 | $174,393 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
| Three Months EndedMarch 31, | ||
|---|---|---|
| 2024 | 2023 | |
| (Unaudited) | (Unaudited) | |
| Cash flows from operating activities | ||
| Net loss | $(2,209) | $(24,500) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities | ||
| Share-based compensation expense | 8,425 | 7,675 |
| Depreciation and amortization expense | 7,101 | 5,755 |
| Deferred income taxes | (697) | — |
| Noncash lease expense | 194 | 161 |
| Long-lived assets write off | — | 613 |
| Changes in operating assets and liabilities: | ||
| Players’ receivables | (2,992) | 3,061 |
| Due from affiliates | 12,879 | 7,150 |
| Prepaid expenses and other current assets | (5,969) | (4,129) |
| Other assets | 6 | 123 |
| Accounts payable | (6,285) | (12,011) |
| Accrued expenses and other current liabilities | 21,413 | (7,233) |
| Players’ liabilities | (334) | (839) |
| Deferred royalty liabilities | (422) | 63 |
| Operating lease liabilities | (202) | (165) |
| Net cash provided by (used in) operating activities | 30,908 | (24,276) |
| Cash flows from investing activities | ||
| Purchases of property and equipment | (278) | (429) |
| Acquisition of gaming licenses | (413) | (79) |
| Internally developed software costs | (6,335) | (5,790) |
| Media content production costs | (259) | (169) |
| Short-term investments | (128) | — |
| Net cash used in investing activities | (7,413) | (6,467) |
| Cash flows from financing activities | ||
| Principal payments of finance lease liabilities | (182) | (24) |
| Net cash used in financing activities | (182) | (24) |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 26 | 283 |
| Net change in cash, cash equivalents and restricted cash | 23,339 | (30,484) |
| Cash, cash equivalents and restricted cash, at the beginning of the period (1) | 170,977 | 206,081 |
| Cash, cash equivalents and restricted cash, at the end of the period (1) | $194,316 | $175,597 |
| Three Months EndedMarch 31, | ||
|---|---|---|
| 2024 | 2023 | |
| (Unaudited) | (Unaudited) | |
| Supplemental disclosure of noncash investing and financing activities: | ||
| Right-of-use assets obtained in exchange for new or modified finance lease liabilities | $436 | $— |
| Allocation of equity and non-controlling interests upon changes in RSILP ownership | $4,762 | $1,518 |
| Property and equipment purchases in Accounts Payable and Accrued Expenses | $79 | $146 |
| Capitalized intangible assets in Accounts Payable and Accrued Expenses | $2,980 | $5,880 |
| Supplemental disclosure of cash flow information: | ||
| Cash paid for income taxes | $2,157 | $818 |
| Cash paid for interest | $252 | $224 |
(1)Cash and cash equivalents and Restricted cash are each presented separately on the condensed consolidated balance sheets.
- Description of Business
Rush Street Interactive, Inc. is a holding company organized under the laws of the State of Delaware and through its main operating subsidiary, Rush Street Interactive, LP and its subsidiaries (collectively, “RSILP”), is a leading online gaming company that provides online casino and sports betting in the U.S., Canadian and Latin American markets. Rush Street Interactive, Inc. and its subsidiaries (including RSILP) are collectively referred to as “RSI” or the “Company.” The Company is headquartered in Chicago, IL.
- Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and the applicable regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 7, 2024.
These unaudited condensed consolidated financial statements include the accounts of the Company, its directly and indirectly wholly owned subsidiaries, and all entities in which the Company has a controlling interest. RSI is deemed to have a controlling interest of RSILP through its wholly owned subsidiary RSI GP, LLC (“RSI GP”), which is the sole general partner of RSILP. For consolidated entities that are less than wholly owned, third-party holdings of equity interests are presented as non-controlling interests in the Company’s condensed consolidated balance sheets and condensed consolidated statements of changes in equity. The portion of net loss attributable to the non-controlling interests is presented as net loss attributable to non-controlling interests in the Company’s condensed consolidated statements of operations, while the portion of comprehensive loss attributable to non-controlling interests is reported as comprehensive loss attributable to non-controlling interests in the Company’s condensed consolidated statements of comprehensive loss. All intercompany accounts and transactions have been eliminated upon consolidation.
The Company is organized as an umbrella partnership-C corporation, or UP-C, structure, as a result of the transactions contemplated in the Business Combination Agreement, dated as of July 27, 2020, among RSILP, the sellers set forth on the signature pages thereto (collectively, the “Sellers” and each, a “Seller”), dMY Sponsor, LLC (the “Sponsor”) and Rush Street Interactive GP, LLC (as amended and/or restated from time to time, the “Business Combination Agreement” and the transactions contemplated thereby, the “Business Combination”). As an UP-C, substantially all of the combined company’s assets are held by RSILP and the Company’s primary assets are its equity interests in RSILP (which are held indirectly through wholly owned subsidiaries of the Company – RSI ASLP, Inc. (the “Special Limited Partner”) and RSI GP). The non-controlling interest represents the Class A Common Units of RSILP (“RSILP Units”) held by holders other than the Company. As of March 31, 2024, the Company owned 35.36% of the RSILP Units and the holders of the non-controlling interest owned 64.64% of the RSILP Units.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications had no impact on the Company’s reported total revenues, expenses, net loss, current assets, total assets, current liabilities, total liabilities, stockholders’ equity, non-controlling interests or cash flows. No reclassifications of prior period balances were material to the unaudited condensed consolidated financial statements.
Interim Unaudited Condensed Consolidated Financial Statements
The accompanying condensed consolidated balance sheet as of March 31, 2024 and the condensed consolidated statements of operations, comprehensive loss, changes in equity and cash flows for the three months ended March 31, 2024 and 2023 are unaudited. The condensed consolidated balance sheet as of December 31, 2023 was derived from audited consolidated financial statements, but may omit certain disclosures required by U.S. GAAP previously disclosed in the most recent annual consolidated financial statements. The interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial condition, its operations and cash flows for the periods presented. The historical results are not necessarily indicative of future results, and the results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year or any future period.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and assumptions reflected in the condensed consolidated financial statements relate to and include, but are not limited to: the valuation of share-based awards; internally developed software; long-lived assets and investments in equity; the estimated useful lives of property and equipment and intangible assets; redemption rate assumptions associated with the loyalty program and other discretionary player bonuses; deferred revenue; accrued expenses; determination of the incremental borrowing rate to calculate operating lease liabilities and finance lease liabilities; and deferred taxes and amounts associated with the tax receivable agreement (the “Tax Receivable Agreement” or “TRA”) entered into in connection with the closing of the transactions contemplated in the Business Combination Agreement on December 29, 2020 (the “Closing”).
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of highly liquid, unrestricted savings, checking, instant access internet banking accounts, money market funds and certificates of deposits with original maturities of 90 days or less at acquisition.
Restricted cash includes any cash and cash equivalents held by the Company that are legally restricted as to withdrawals or usage. This consists of certain deposits that are restricted under regulatory requirements. Regardless of whether customer deposits are legally restricted, the Company maintains separate bank accounts to segregate cash that resides in customers’ accounts from operational funds.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist primarily of prepaid expenses and short-term investments. Prepaid expenses consist of various advance payments for goods or services to be received in the future. These costs include insurance, subscriptions, marketing, other contracted services and deposits paid in advance. As of March 31, 2024 and December 31, 2023, the Company had prepaid expenses of $9.1 million and $7.5 million, respectively.
Short-term investments consist of certificates of deposit with an original maturity greater than three months but less than one year. As of March 31, 2024 and December 31, 2023, the Company had short-term investments of $3.2 million and $3.1 million, respectively.
Surety Bonds
The Company had been issued $30.0 million and $28.0 million in surety bonds as of March 31, 2024 and December 31, 2023, respectively, that are used to satisfy regulatory requirements related to securing cash held for the benefit of customers.
The Company had been issued $4.6 million in surety bonds as of March 31, 2024 and December 31, 2023 to satisfy regulatory requirements necessary to operate in certain jurisdictions.
There have been no claims against any of our surety bonds and the likelihood of future claims is expected to be remote.
Foreign Currency Gains and Losses
The financial statements of foreign subsidiaries are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters, using period-end exchange rates for assets and liabilities, and average exchange rates for the period for revenues, costs and expenses. The U.S. dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recorded in the foreign currency translation adjustment account, which is included in equity as a component of accumulated other comprehensive loss.
If transactions are recorded in a currency other than the subsidiary’s functional currency, remeasurement into the functional currency is required and may result in transaction gains or losses. Transaction losses were $0.4 million for the three months ended March 31, 2024 compared to gains of $0.4 million for the same period in 2023. Amounts are recorded in general and administrative on the Company’s unaudited condensed consolidated statements of operations.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-6, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. This ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for the Company in calendar year 2024. The Company adopted ASU 2020-6 and the adoption did not have a material impact on its condensed consolidated financial statements and related disclosures.
Recent Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in the update and existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company will adopt this standard beginning with our fiscal year ending December 31, 2024. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency, decision usefulness and effectiveness of income tax disclosures. The amendments in this ASU require a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. A public entity is also required to provide a qualitative description of the states and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions. The amendments also remove certain disclosures that are no longer considered cost beneficial. The amendments are effective prospectively for annual periods beginning after December 15, 2024, and early adoption and retrospective application are permitted. The Company is currently evaluating the impact of these new disclosure requirements on its condensed consolidated financial statements.
- Revenue Recognition
The Company’s revenue from contracts with customers is derived from online casino, online sports betting, retail sports betting and social gaming.
Online casino and online sports betting
Online casino offerings typically include the full suite of games available in land-based casinos, such as table games (i.e., blackjack and roulette) and slot machines. The Company generates revenue from these offerings through hold, or gross winnings, as customers play against the house. Online casino revenue is generated based on total customer bets less amounts paid to customers for winning bets, less other incentives awarded to customers, plus or minus the changes in unsettled bets and the progressive jackpot liability.
Online sports betting involves a user placing a bet on the outcome of a sporting event, sports-related activity or a series of the same, with the chance to win a pre-determined amount, often referred to as fixed odds. Online sports betting revenue is generated by setting odds such that there is a built-in theoretical margin in each bet offered to customers. Online sports betting revenue is generated based on total customer bets less amounts paid to customers for winning bets, less other incentives awarded to customers, plus or minus the change in unsettled bets.
Retail sports betting
The Company provides retail sports services to land-based partners in exchange for a monthly commission based on that partner’s retail sportsbook revenue. Services generally include ongoing management and oversight of the retail sportsbook, technical support for the partner’s customers, risk management, advertising and promotion, and support for third-party vendors’ sports betting equipment. The Company has a single performance obligation to provide retail sports services and records the revenue as services are performed and when the commission amounts are no longer constrained (i.e., the amount is known).
Certain relationships with business partners provide the Company the ability to operate the retail sportsbook. In this scenario, revenue is generated based on total customer bets less amounts paid to customers for winning bets, less other incentives awarded to customers, plus or minus the change in unsettled retail sports bets and unclaimed retail tickets for settled retail bets.
Social gaming
The Company provides a social gaming platform for users to enjoy free-to-play games that use virtual credits. While virtual credits are issued to users for free, some users may choose to purchase additional virtual credits through the Company’s virtual cashier. The Company has a single performance obligation associated with social gaming services, to provide social gaming services to users upon the redemption of virtual credits. Deferred revenue is recorded when users purchase virtual credits and revenue is recognized when the virtual credits are redeemed and the Company’s performance obligation has been fulfilled.
Disaggregation of revenue for the three months ended March 31, 2024 and 2023, was as follows:
| Three Months EndedMarch 31, | ||
|---|---|---|
| ($ in thousands) | 2024 | 2023 |
| Online casino and online sports betting | $215,622 | $157,672 |
| Retail sports betting | 708 | 3,663 |
| Social gaming | 1,098 | 1,026 |
| Total revenue | $217,428 | $162,361 |
Revenue by geographic region for the three months ended March 31, 2024 and 2023, was as follows:
| Three Months EndedMarch 31, | ||
|---|---|---|
| ($ in thousands) | 2024 | 2023 |
| United States and Canada | $188,537 | $146,697 |
| Latin America, including Mexico | 28,891 | 15,664 |
| Total revenue | $217,428 | $162,361 |
Deferred revenue associated with online casino and online sports betting revenue and retail sports betting revenue includes unsettled customer bets and is included within Players’ liabilities in the condensed consolidated balance sheets.
The deferred revenue balances as of March 31, 2024 and March 31, 2023 were as follows:
| Three Months EndedMarch 31, | ||
|---|---|---|
| ($ in thousands) | 2024 | 2023 |
| Deferred revenue, beginning of period | $7,013 | $7,840 |
| Deferred revenue, end of period | $8,275 | $8,017 |
| Revenue recognized during the period from amounts included in deferred revenue at the beginning of the period | $6,312 | $7,056 |
- Intangible Assets, Net
The Company had the following intangible assets, net as of March 31, 2024 and December 31, 2023:
| ($ in thousands) | Weighted Average Remaining AmortizationPeriod (years) | GrossCarryingAmount | AccumulatedAmortization | Net |
|---|---|---|---|---|
| License Fees | ||||
| March 31, 2024 | 7.19 | $51,960 | $(16,281) | $35,679 |
| December 31, 2023 | 7.75 | $61,015 | $(25,946) | $35,069 |
| Internally Developed Software | ||||
| March 31, 2024 | 2.33 | $49,970 | $(16,005) | $33,965 |
| December 31, 2023 | 2.37 | $43,868 | $(12,601) | $31,267 |
| Developed Technology | ||||
| March 31, 2024 | 5.75 | $5,931 | $(1,668) | $4,263 |
| December 31, 2023 | 6.00 | $5,931 | $(1,483) | $4,448 |
| Trademark Asset | ||||
| March 31, 2024 | 3.17 | $5,088 | $(1,866) | $3,222 |
| December 31, 2023 | 3.42 | $5,088 | $(1,611) | $3,477 |
| Media Content | ||||
| March 31, 2024 | 1.55 | $1,057 | $(280) | $777 |
| December 31, 2023 | 1.60 | $785 | $(172) | $613 |
Amortization expense was $6.1 million for the three months ended March 31, 2024 compared to amortization expense of $4.7 million for the same period in 2023.
- Property and Equipment, net
The Company had the following property and equipment, net as of March 31, 2024 and December 31, 2023:
| ($ in thousands) | March 31,2024 | December 31, 2023 |
|---|---|---|
| Computers, software and related equipment | $4,315 | $4,259 |
| Operating equipment and servers | 3,065 | 4,779 |
| Furniture | 799 | 782 |
| Leasehold improvements | 1,813 | 1,805 |
| Property and equipment not yet placed into service | 628 | 610 |
| Total property and equipment | 10,620 | 12,235 |
| Less: accumulated depreciation | (6,467) | (7,641) |
| 4,153 | 4,594 | |
| Finance lease right-of-use assets | 5,497 | 5,519 |
| Less: accumulated amortization | (1,437) | (1,502) |
| 4,060 | 4,017 | |
| Property and equipment, net | $8,213 | $8,611 |
The Company recorded depreciation expense on property and equipment of $0.6 million and $0.9 million for the three months ended March 31, 2024 and 2023, respectively. The Company recorded amortization expense on finance lease right-of-use assets of $0.4 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.
- Accrued Expenses and Other Current Liabilities
The Company has the following accrued expenses as of March 31, 2024 and December 31, 2023:
| ($ in thousands) | March 31,2024 | December 31,2023 |
|---|---|---|
| Accrued operating expenses | $36,802 | $21,748 |
| Accrued marketing expenses | 12,719 | 9,319 |
| Accrued compensation and related expenses | 9,059 | 13,781 |
| Accrued administrative expenses | 5,464 | 5,506 |
| Other | 577 | 777 |
| Total accrued expenses | $64,621 | $51,131 |
Other current liabilities includes income tax payable totaling $12.4 million and $8.1 million as of March 31, 2024 and December 31, 2023, respectively. Other current liabilities also includes license fees payable of $2.4 million andnil as of March 31, 2024 and December 31, 2023, respectively.
- Stockholders’ Equity
Non-Controlling Interests
Non-controlling interests represents the RSILP Units held by holders other than the Company.
Non-controlling interests owned 64.64% and 67.51% of the RSILP Units outstanding as of March 31, 2024 and December 31, 2023, respectively. The table below illustrates a rollforward of the non-controlling interests’ ownership during the three months ended March 31, 2024:
| Non-Controlling Interest % | |
|---|---|
| Non-controlling interests ownership % as of December 31, 2023: | 67.51% |
| Issuance of Class A Common Stock upon RSILP Unit Exchanges | (2.26)% |
| Issuance of Class A Common Stock in connection with the vesting of certain share-based equity grants | (0.61)% |
| Non-controlling interests ownership % as of March 31, 2024: | 64.64% |
Non-controlling interests owned 69.65% and 70.55% of the RSILP Units outstanding, as of March 31, 2023 and December 31, 2022, respectively. The table below illustrates a rollforward of the non-controlling interests’ ownership during the three months ended March 31, 2023:
| Non-Controlling Interest % | |
|---|---|
| Non-controlling interests ownership % as of December 31, 2022: | 70.55% |
| Issuance of Class A Common Stock upon RSILP Unit Exchanges | (0.68)% |
| Issuance of Class A Common Stock in connection with the vesting of certain share-based equity grants | (0.22)% |
| Non-controlling interests ownership % as of March 31, 2023: | 69.65% |
- Share-Based Compensation
The Company adopted the Rush Street Interactive, Inc. 2020 Omnibus Equity Incentive Plan, as amended from time to time (the “2020 Plan”), to attract, retain and incentivize employees, certain consultants and directors who will contribute to the success of the Company. Awards that may be granted under the 2020 Plan include incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards, cash awards and other equity-based awards.
In 2023, the Compensation Committee of the Board and the full Board each approved an amendment to the 2020 Plan to increase the number of shares of Class A Common Stock reserved under the 2020 Plan by 22.4 million shares, with the Company’s stockholders approving such amendment at the Company’s 2023 annual meeting of stockholders on June 1, 2023. There are approximately 35.8 million shares of Class A Common Stock reserved under the 2020 Plan. The 2020 Plan will terminate on December 29, 2030.
Restricted Stock Units (“RSUs”) and Options
The Company granted 1,813,694 and 2,479,719 RSUs with service conditions, during the three months ended March 31, 2024 and 2023, respectively. RSUs with service conditions generally vest over athree tofour year period, with each tranche vesting annually. The grant date fair value of RSUs with service conditions is determined based on the quoted market price.
The Company granted 1,152,122 and 1,463,602 RSUs with market-based conditions (e.g., share price targets, total shareholder return) during the three months ended March 31, 2024 and 2023, respectively. RSUs with market-based conditions generally vest over athree-year period and fair value was determined using a Monte Carlo Simulation using the following assumptions during the three months ended March 31:
| 2024 | 2023 | |
|---|---|---|
| Volatility rate | 68.48% | 69.78% |
| Risk-free interest rate | 4.55% | 3.85% |
| Average expected life (in years) | 2.8 | 2.8 |
| Dividend yield | None | None |
| Stock price at grant date | $5.79 | $3.28 |
The Company granted 630,897 and 1,061,454 stock options during the three months ended March 31, 2024 and 2023, respectively. The estimated grant date fair value of stock options was determined using a Black-Scholes valuation model using the following weighted-average assumptions during the three months ended March 31:
| 2024 | 2023 | |
|---|---|---|
| Volatility rate | 68.00% | 70.00% |
| Risk-free interest rate | 4.30% | 3.80% |
| Average expected life (in years) | 6.0 | 6.0 |
| Dividend yield | None | None |
| Stock price at grant date | $5.79 | $3.28 |
| Exercise price | $5.79 | $3.28 |
RSU activity for the three months ended March 31, 2024 and 2023 was as follows:
| Number of units | Weighted-average grant price | |
|---|---|---|
| Unvested balance at December 31, 2023 | 9,218,142 | $5.70 |
| Granted | 2,965,816 | 7.06 |
| Vested(1) | (1,532,353) | 3.92 |
| Forfeited | (3,264) | 3.59 |
| Unvested balance at March 31, 2024 | 10,648,341 | $6.34 |
| Unvested balance at December 31, 2022 | 7,492,613 | $7.48 |
| Granted | 3,943,321 | 4.12 |
| Vested(1) | (902,759) | 4.03 |
| Forfeited | (4,216) | 8.81 |
| Unvested balance at March 31, 2023 | 10,528,959 | $6.52 |
(1)Includes 279,061 and 200,000 of RSUs that vested during the three months ended March 31, 2024 and 2023, respectively, but the resulting shares of Class A Common Stock have not yet been issued. There were 530,780 and 836,917 RSUs that vested for which the resulting shares of Class A Common Stock were not issued as of March 31, 2024 and 2023, respectively.
Stock option activity for the three months ended March 31, 2024 and 2023 was as follows:
| Number of options | Weighted-average exercise price | |
|---|---|---|
| Outstanding balance at December 31, 2023 | 1,971,611 | $4.16 |
| Granted | 630,897 | 5.79 |
| Exercised | — | — |
| Forfeited | — | — |
| Outstanding balance at March 31, 2024 | 2,602,508 | $4.56 |
| Exercisable balance at March 31, 2024 | 689,487 | $4.69 |
| Outstanding balance at December 31, 2022 | 887,166 | $5.24 |
| Granted | 1,061,454 | 3.28 |
| Exercised | — | — |
| Forfeited | — | — |
| Outstanding balance at March 31, 2023 | 1,948,620 | $4.21 |
The aggregate fair value of the RSUs granted during the three months ended March 31, 2024 and 2023, was approximately $20.9 million and $16.3 million, respectively. The aggregate grant date fair value of RSUs vested during the three months ended March 31, 2024 and 2023 was approximately $6.0 million and $3.6 million, respectively.
The weighted-average grant-date fair values of options granted during the three months ended March 31, 2024 and 2023 was $3.74 and $2.14, respectively. The aggregate fair value of stock options granted during the three months ended March 31, 2024 and 2023 was approximately $2.4 million and $2.3 million, respectively. The outstanding stock options and exercisable stock options as of March 31, 2024 had an intrinsic value of $5.9 million and $1.8 million, respectively.
As of March 31, 2024, the Company had unrecognized share-based compensation expense related to RSUs of $50.7 million. The outstanding RSUs had a remaining weighted-average vesting period of 1.10 years as of March 31, 2024.
As of March 31, 2024, the Company had unrecognized share-based compensation expense related to stock options of $4.7 million. The outstanding options had a remaining weighted-average vesting period of 1.22 years as of March 31, 2024.
Share-based compensation expense for the three months ended March 31, 2024 and 2023 was as follows:
| Three Months Ended March 31, | ||
|---|---|---|
| ($ in thousands) | 2024 | 2023 |
| Costs of revenue | $270 | $257 |
| Advertising and promotions | 570 | 536 |
| General and administrative | 7,585 | 6,882 |
| Total share-based compensation expense | $8,425 | $7,675 |
- Income Taxes
The income tax provision for the three months ended March 31, 2024 and 2023 was as follows:
| Three Months Ended March 31, | ||
|---|---|---|
| ($ in thousands) | 2024 | 2023 |
| Income tax provision | $5,300 | $2,800 |
The Company recognized federal, state and foreign income tax expense of $5.3 million and $2.8 million during the three months ended March 31, 2024 and 2023, respectively. The effective tax rates for the three months ended March 31, 2024 and 2023 were 171.5% and (13.3)%, respectively. The difference between the Company’s effective tax rate and the U.S. statutory tax rate of 21% was primarily due to a full valuation allowance recorded on the Company’s net U.S. deferred tax assets, non-taxable income / (loss) attributable to non-controlling interest and income tax rate differences related to the Company’s Colombia operations for which both current and deferred taxes were recorded. The Company evaluates the realizability of the deferred tax assets on a quarterly basis and establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset may not be realized.
In connection with the Business Combination, the Special Limited Partner entered into the TRA, which generally provides that it pay 85% of certain net tax benefits, if any, that the Company (including the Special Limited Partner) realizes (or in certain cases is deemed to realize) as a result of an increase in tax basis and tax benefits related to the transactions contemplated under the Business Combination Agreement and the exchange of Retained RSILP Units (as defined in the Business Combination Agreement) for Class A Common Stock (or cash at the Company’s option) pursuant to RSILP’s amended and restated limited partnership agreement and tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. These payments are the obligation of the Special Limited Partner and not of RSILP. The actual increase in the Special Limited Partner’s allocable share of RSILP’s tax basis in its assets, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including the timing of exchanges, the market price of the Class A Common Stock at the time of the exchange and the amount and timing of the recognition of RSI and its consolidated subsidiaries’ (including the Special Limited Partner’s) income.
Based primarily on historical losses of RSILP, management has determined it is more-likely-than-not that the Company will be unable to utilize its deferred tax assets subject to the TRA; therefore, management applies a full valuation allowance to deferred tax asset or a corresponding liability under the TRA related to the tax savings the Company may realize from the utilization of tax deductions related to basis adjustments created by the transactions in the Business Combination Agreement. The unrecognized TRA liability as of March 31, 2024 and December 31, 2023 was $73.6 million and $63.7 million, respectively. The increase in the liability is primarily due to the issuance of Class A Common Stock upon RSILP Unit exchanges. Due to the fact that the Company's deferred tax assets and corresponding TRA liability are unrecognized, this increase had no impact on the condensed consolidated statements of operations and condensed consolidated statements of comprehensive loss.
- Net loss Per Share
The basic and diluted net loss per share for the three months ended March 31, 2024 and 2023 were as follows (amounts in thousands, except for share and per share amounts):
| Three Months EndedMarch 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Numerator: | ||
| Net loss | $(2,209) | $(24,500) |
| Less: Net loss attributable to non-controlling interests | (1,482) | (17,240) |
| Net loss attributable to Rush Street Interactive, Inc. – basic and diluted | $(727) | $(7,260) |
| Denominator: | ||
| Weighted average common shares outstanding – basic and diluted | 76,027,427 | 65,260,064 |
| Net loss per Class A common share – basic and diluted | $(0.01) | $(0.11) |
The Class V Common Stock does not participate in the Company’s earnings or losses and is therefore not a participating security. As such, separate presentation of basic and diluted earnings per share of Class V Common Stock under the two-class method has not been presented.
The Company excluded the following securities from its computation of diluted shares outstanding as their effect would have been anti-dilutive:
| Three Months Ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| RSILP Units(1) | 145,384,310 | 154,455,584 |
| Unvested RSUs | 10,648,341 | 10,528,959 |
| Vested RSUs (Class A Common Stock not yet issued) | 530,780 | 836,917 |
| Outstanding Stock Options | 2,602,508 | 1,948,620 |
(1) RSILP Units that are held by non-controlling interest holders and may be exchanged, subject to certain restrictions, for Class A Common Stock. Upon exchange of an RSILP Unit, a share of Class V Common Stock is cancelled.
- Related Parties
Affiliated Land-Based Casinos
Neil Bluhm and his adult children (including Ms. Leslie Bluhm), through their individual capacities, entities or trusts that they have created for the benefit of themselves or their family members, and Greg Carlin, through his individual capacity, entities or trusts that he has created for the benefit of himself or his family members, are direct or indirect owners, directors and/or officers of certain land-based casinos. The Company has entered into certain agreements with these affiliated land-based casinos that create strategic partnerships aimed to capture the online gaming, online sports betting and retail sports services markets in the various states and municipalities where the land-based casinos operate.
Generally, the Company pays a royalty fee to the land-based casino (calculated as a percentage of the Company’s revenue less reimbursable costs or other consideration received as defined in the applicable agreement) in exchange for the right to operate real-money online casino and/or online sports betting under the gaming license of the land-based casinos or for marketing gaming offerings under the land-based casinos’ brand. Royalties related to arrangements with affiliated casinos were $15.6 million and $7.7 million for the three months ended March 31, 2024 and 2023, respectively, which were net of any consideration received from the affiliated casino for reimbursable costs, as well as costs that are paid directly by the affiliate casino on the Company’s behalf. Net royalties paid are recorded as costs of revenue in the accompanying condensed consolidated statements of operations.
In certain cases, the affiliate casino maintains the bank account that processes cash deposits and withdrawals for the Company’s customers. Accordingly, at any point in time, the Company will record a receivable from the affiliate, representing the Company’s total gaming revenue (with customers) that was collected by the affiliate, less consideration payable to the affiliate for use of its license, which is offset by any consideration owed to the Company from the affiliate based on the terms of the applicable agreement. Receivables due from affiliated land-based casinos were $20.6 million and $33.5 million at March 31, 2024 and December 31, 2023, respectively.
In addition, the Company provides retail sports services to certain affiliated land-based casinos in exchange for a monthly commission based on the casino’s retail sportsbook revenue. Services generally include ongoing management and oversight of the retail sportsbook, technical support for the casino’s customers, risk management, advertising and promotion, and support for third-party vendors’ sports betting equipment. Revenue recognized relating to retail sports services provided to affiliated land-based casinos for the three months ended March 31, 2024 and 2023 were not material to the condensed consolidated financial statements. Any payables due to the affiliated land-based casinos are netted against affiliate receivables to the extent a right of offset exists.
- Commitments and Contingencies
Legal Matters
The Company is not a party to any material legal proceedings and is not aware of any material pending or threatened claims. From time to time however, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.
Other Contractual Obligations
The Company is a party to several non-cancelable contracts with vendors and licensors for marketing and other strategic partnership-related agreements where the Company is obligated to make future minimum payments under the non-cancelable terms of these contracts as follows ($ in thousands):
| Remainder of 2024 | $13,554 |
|---|---|
| Year ending December 31, 2025 | 9,065 |
| Year ending December 31, 2026 | 5,965 |
| Year ending December 31, 2027 | 6,142 |
| Year ending December 31, 2028 | 4,777 |
| Thereafter | 23,843 |
| Total(1) | $63,346 |
| (1) | Includes obligations under license and market access commitments totaling $43.7 million, obligations under non-cancelable contracts with marketing vendors totaling $13.0 million and non-cancelable lease contracts totaling $6.6 million. Certain market access arrangements require the Company to make additional payments at a contractual milestone date if the market access fees paid through that milestone date do not meet a minimum contractual threshold. In these instances, the Company calculates the future minimum payment as the total milestone payment less any amounts already paid to the partner and includes such payments in the period in which the milestone date occurs. |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.