Rush Street Interactive Inc.

10/30/2025 | Press release | Distributed by Public on 10/30/2025 14:29

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, our Annual Report on Form 10-K for the year ended December 31, 2024 (our "Annual Report"), and our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this "Report"). In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the sections of this Report captioned "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors." For a discussion of limitations in measuring certain of our key metrics, see the section of this Report captioned "Limitations of Key Metrics and Other Data."
This Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain financial measures, in particular the presentation of Adjusted EBITDA, which are not presented in accordance with generally accepted accounting principles of the United States ("GAAP"). We present these non-GAAP financial measures because they provide us and readers of this Report with additional insight into our operational performance relative to earlier periods and relative to our competitors. These non-GAAP financial measures are not a substitute for any GAAP financial information. Readers of this Report should use these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. Reconciliations of Adjusted EBITDA to Net Income, the most comparable GAAP measure, are provided in this Report.
Unless the context requires otherwise, all references in this Report to the "Company," "we," "us," or "our" refer to Rush Street Interactive, Inc. and its subsidiaries.
Our Business
We are a leading online gaming and entertainment company that focuses primarily on online casino and online sports betting in the U.S., Canadian and Latin American markets. Our mission is to engage and delight players by delivering friendly, fun and fair betting experiences. In furtherance of this mission, we strive to create an online community for our customers where we are transparent and honest, treat our customers fairly, show them that we value their time and loyalty, and listen to feedback. We also endeavor to implement industry leading responsible gaming practices and provide our customers with a cutting-edge online gaming platform and exciting, personalized offerings that will enhance their user experience.
We provide our customers with an array of leading gaming offerings such as real-money online casino, online sports betting and retail sports betting (i.e., sports betting services provided at bricks-and-mortar locations), as well as social gaming, which involves free-to-play games using virtual credits that users can earn or purchase. We launched our first social gaming website in 2015 and began accepting real-money bets in the United States in 2016. Currently, we offer real-money online casino, online sports betting and/or retail sports betting in 16 U.S. states and the four international markets as outlined in the table below.
Jurisdictions Online Casino Online Sports
Betting 		Retail Sports
Betting
Domestic:
Arizona ü
Colorado ü
Delaware
ü ü
Illinois ü ü
Indiana ü ü
Iowa ü
Louisiana ü
Maryland ü ü
Michigan ü ü ü
New Jersey ü ü
New York ü ü
Ohio ü
Pennsylvania ü ü ü
Virginia ü ü
Washington
ü
West Virginia ü ü
International:
Colombia ü ü
Mexico
ü ü
Ontario (Canada) ü ü
Peru
ü ü
Our real-money online casino and online sports betting offerings are currently provided under our BetRivers and PlaySugarHouse brands in the United States and Canada and under our RushBet brand in Latin America (which includes Mexico). We operate and/or support retail sports betting for our bricks-and-mortar partners under our brands or their respective brands depending on the terms of our arrangement. Many of our social gaming offerings are marketed under our own brands, although we also offer social gaming under our partners' brands as well. Our decision about what brand or brands to use is market and/or partner specific, and is based on brand awareness, market research, marketing efficiency, contractual obligations and applicable gaming rules and regulations.
Trends in Key Metrics
Monthly Active Users
MAUs is the number of unique users per month who have placed at least one real-money bet across one or more of our online casino, poker or online sports betting offerings. We average the MAUs for the months in the relevant period. We exclude users who have made a deposit but have not yet placed a real-money bet on at least one of our online offerings. We also exclude users who have placed a real-money bet but only with promotional incentives.
MAUs is a key indicator of the scale of our user base and awareness of our brands. We believe that year-over-year MAUs is also generally indicative of the long-term revenue growth potential of our business, although MAUs in individual periods may be less indicative of our longer-term expectations. We expect the number of MAUs to grow as we attract, retain and re-engage users in new and existing jurisdictions and expand our offerings to appeal to a wider audience.
The chart below presents our average MAUs in the United States and Canada for the nine months ended September 30, 2025 and 2024:
The increase in MAUs in the United States and Canada was mainly due to our continued growth and strong customer retention rates in existing markets. Additionally, we continue to achieve a positive response from our strategic advertising and marketing efforts.
The chart below presents our average MAUs in Latin America (including Mexico) for the nine months ended September 30, 2025 and 2024:
The increase in MAUs in Latin America was mainly due to our continued growth and strong customer retention rates in Colombia and Mexico and expansion into new markets such as Peru. Additionally, we continue to achieve a positive response from our strategic advertising and marketing efforts.
Average Revenue Per Monthly Active User
ARPMAU for an applicable period is monthly revenue divided by average MAUs. This key metric represents our ability to drive usage and monetization of our online offerings.
The chart below presents our ARPMAU in the United States and Canada for the nine months ended September 30, 2025 and 2024:
ARPMAU remained generally flat in the United States and Canada year-over-year while significantly increasing MAUs in the same period.
The chart below presents our ARPMAU in Latin America (including Mexico) for the nine months ended September 30, 2025 and 2024:
The year-over-year decrease in ARPMAU in Latin America was mainly driven by the negative impact of additional player bonusing as a result of the value-added tax imposed on customer deposits in Colombia, which became effective during the nine months ended September 30, 2025, and unfavorable foreign exchange rate fluctuations.
Non-GAAP Information
This Report includes Adjusted EBITDA, which is a non-GAAP performance measure that we use to supplement our results presented in accordance with GAAP. We believe Adjusted EBITDA provides useful information to investors regarding our results of operations and operating performance, as it is similar to measures reported by our public competitors and is regularly used by securities analysts, institutional investors and other interested parties in analyzing operating performance and prospects. Non-GAAP financial measures are not intended to be considered in isolation or as a substitute for any GAAP financial measures and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.
We define Adjusted EBITDA as net income before interest income or expense, income taxes, depreciation and amortization, share-based compensation, adjustments for certain one-time or non-recurring items and other adjustments. Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because certain expenses are either non-cash or are not related to our underlying business performance.
We include Adjusted EBITDA because management uses it to evaluate our core operating performance and trends and to make strategic decisions regarding the distribution of capital and new investments. Management believes that Adjusted EBITDA provides investors with useful information on our past financial and operating performance, enables comparison of financial results from period-to-period where certain items may vary independent of business performance, and allows for greater transparency with respect to metrics used by our management in operating our business. Management also believes that Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.
The table below presents our Adjusted EBITDA reconciled from our net income, the most directly comparable GAAP measure, for the periods indicated:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
($ in thousands) 2025 2024 2025 2024
Net income $ 14,846 $ 3,239 $ 54,887 $ 748
Interest income, net (2,555) (2,049) (6,435) (5,525)
Income tax expense (benefit)
7,177 5,274 (102,775) 16,970
Depreciation and amortization 10,188 8,471 29,506 23,127
Share-based compensation expense 6,379 8,458 21,290 26,574
Tax receivable agreement expense
- - 113,037 -
Adjusted EBITDA $ 36,035 $ 23,393 $ 109,510 $ 61,894
Key Components of Revenue and Expenses
Revenue
We currently offer real-money online casino, online sports betting and/or retail sports betting in 16 U.S. states, Colombia, Ontario, Canada, Mexico and Peru. We also provide social gaming (where permitted), where users can earn or purchase virtual credits to enjoy free-to-play games.
Our revenue is predominantly generated from our U.S. and Canada operations, with the remaining revenue being generated from our Latin America (including Mexico) operations. We generate revenue primarily through the following offerings:
Online Casino
Online casino offerings typically include the full suite of games available in bricks-and-mortar casinos, such as table games (i.e., blackjack and roulette), slot machines and poker games. For these offerings (other than online poker), similar to bricks-and-mortar casinos, we generate revenue through hold, or gross winnings, as customers play against the house. For our poker game offerings, like land-based card rooms that are typically incorporated in land-based casinos, we are generally not exposed to the risks of game play or the outcome of the game as players are not playing against the house but are instead playing against each other on a peer-to-peer basis. We generate revenue through rake, or a small commission taken from the total wagers placed on the hand, which is generally subject to a cap, and through tournament entry fees. Like bricks-and-mortar casinos, there is volatility with online casino, but as the number of bets placed increases, the revenue retained from bets placed becomes easier to predict. Our experience has been that online casino revenue is less volatile than sports betting revenue.
Our online casino offering consists of a combination of licensed content from leading industry suppliers, customized third-party games, our proprietary online poker platform and a small number of proprietary games that were developed exclusively for us. Third-party content is usually subject to standard revenue-sharing agreements specific to each supplier, where the supplier generally receives a percentage of the net gaming revenue generated from its casino games played on our platform. In exchange, we receive a limited license to offer the games on our platform to customers in permitted jurisdictions. We generally pay much lower fees on revenue generated through our proprietary casino games such as our multi-bet blackjack (with side bets: 21+3, Lucky Ladies, Lucky Lucky), and single-deck blackjack, which primarily relate to hosting/remote gaming server fees and certain intellectual property license fees.
With respect to online poker, player liquidity, or the number or volume of players with an operator, is critical to the success of the game, with a greater number of players supporting a wider range and greater volume of games and larger tournaments, thereby increasing the quality of the offering to the consumer. Our online poker offerings include a comprehensive suite of game formats, including cash games, sit & go tournaments, and multi-table tournaments, catering to players of all skill levels. Players play against each other in either ring games (i.e., games for cash on a hand-by-hand basis) or in tournaments (i.e., players play against each other for tournament chips with prize money distributed to the last remaining competitors) or variations thereof.
Online casino revenue (other than from online poker) is generated based on total customer bets less amounts paid to customers for winning bets, less incentives awarded to customers, plus or minus the change in the progressive jackpot reserve. Online casino revenue from online poker is recognized as rake (i.e., percentage of a game's wagers earned by the Company for satisfying the performance obligation) less any value given back to players, which could be in the form of cash, tournament tickets or other form of bonuses.
Online Sports Betting
Online sports betting involves a user placing a bet on the outcome of a sporting event, a 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 sports bet offered to customers. While sporting event outcomes may result in revenue volatility, we believe that we can achieve a positive long-term betting win margin. In addition to traditional fixed-odds betting, we also offer other fixed-odd sports betting products including in-game betting and multi-sport and same-game parlay betting. We have also incorporated live streaming of certain sporting events into our online sports betting offering. Integrated into our online sports betting platform is a third-party risk and trading platform currently provided by certain subsidiaries of Kambi Group plc.
Online sports revenue is generated based on total customer bets less amounts paid to customers for winning bets, less incentives awarded to customers, plus or minus the change in unsettled sports bets.
Retail Sports Betting
We provide retail sports betting services to certain land-based partners in exchange for a monthly commission that is calculated based on the land-based retail sportsbook revenue. Services generally include ongoing management and oversight of the retail sportsbook (i.e., within a bricks-and-mortar location), technical support for such partner's customers, risk management, advertising and promotion, and support for third-party sports betting equipment.
In addition, certain relationships with our partners provide us the ability to operate the retail sportsbook at the land-based partner's facility. 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
We provide social gaming (where permitted) where users can earn or purchase virtual credits to enjoy free-to-play games. Users who exhaust their credits can either purchase additional virtual credits from the virtual cashier or wait until their virtual credits are replenished for free. Virtual credits have no monetary value and can only be used within our social gaming platform.
Our social gaming business has three main goals: build online databases in key markets ahead of and post-legalization and regulation; generate revenues; and increase engagement and visitation to our bricks-and-mortar partner properties. Our social gaming products are a marketing tool that keeps the applicable brands present in the minds of our users and engages with users through another channel while providing the entertainment value that users seek. We also leverage our social gaming products to cross-sell to our real-money offerings in jurisdictions where real-money gaming is authorized.
We recognize deferred revenue when users purchase virtual credits and revenue when those credits are redeemed. We pay a percentage of the social gaming revenue derived from the sale and redemption of the virtual credits to content suppliers as well as to our land-based partners.
Costs and Expenses
Costs of Revenue.Costs of revenue consist primarily of (i) revenue share and market access fees, (ii) third-party platform and content fees, (iii) gaming taxes, (iv) payment processing fees and chargebacks and (v) salaries, bonuses, benefits and share-based compensation for dedicated personnel. These costs are primarily variable in nature and should typically correlate with the change in revenue. Revenue share and market access fees consist primarily of variable amounts paid to local partners that hold the applicable gaming license, providing us the ability to offer our real-money online offerings in the respective jurisdictions. Our third-party platform and content fees are primarily driven by costs associated with third-party casino content, data and streaming, sports betting trading services and certain elements of our platform technology, such as geolocation and know-your-customer. Gaming taxes relate to state taxes that are determined on a jurisdiction-by-jurisdiction basis, or federal excise taxes that are determined based on a percentage of the total online sports
and retail sports bets placed. We incur payment processing costs on customer deposits, withdrawals and occasionally chargebacks (i.e., when a payment processor contractually disallows customer deposits in the normal course of business).
Sales and Marketing Costs.Sales and marketing costs consist primarily of costs associated with marketing our offerings via different channels, promotional activities and related customer acquisition costs. These costs also include salaries, bonuses, benefits and share-based compensation for dedicated personnel and are expensed as incurred.
Our ability to effectively market is critical to our success. Using experience, dynamic learnings and analytics, we leverage marketing to acquire, convert, retain and re-engage customers. We use a variety of earned media and paid marketing channels, in combination with compelling offers, brand ambassadors, proprietary content, and unique game and site features, to attract and engage customers. Further, we continuously optimize our marketing spend using data collected from our operations. Our marketing spend is based on a return-on-investment model that considers a variety of factors, including the product offerings in the jurisdiction, local advertising rules, the performance of different marketing channels, predicted lifetime value, marginal costs and expenses and behavior of customers across various product offerings.
With respect to paid marketing, we use a broad array of advertising channels, including television, radio, social media platforms, sponsorships, affiliates and paid search, and other digital channels. We also use other forms of marketing and outreach, such as our social media channels, first-party websites, media interviews and other media spots and organic searches. These efforts are primarily concentrated within the specific jurisdictions where we operate or intend to operate. We believe there is significant benefit to having a flexible approach to advertising spending as we can quickly redirect our advertising spending based on dynamic testing of our advertising methods and channels.
General and Administrative.General and administrative expenses consist primarily of administrative personnel costs, including salaries, bonuses and benefits, share-based compensation expense for dedicated personnel, professional fees related to legal, compliance, audit and consulting services, rent, insurance costs, technology and foreign exchange gains or losses.
Depreciation and Amortization.Depreciation and amortization expense consists of depreciation on our property and equipment and amortization of intangible assets (including market access licenses, gaming jurisdictional licenses, internally developed software, developed technology, and other intangible assets) and finance lease right-of-use assets over their useful lives.
Tax Receivable Agreement Expense.Tax receivable agreement expense consists of the accounting cost associated with the initial recognition of the TRA liability as of June 30, 2025. This expense reflects changes in the estimated future payments under the TRA attributable to RSILP Unit exchanges completed prior to that date. These prior exchanges increased the Company's tax basis in its share of RSILP's underlying assets, giving rise to expected tax savings and corresponding TRA liability. RSILP Unit exchanges occurring after June 30, 2025 will not result in TRA expense, as the associated increase in tax basis and the resulting TRA liability will be accounted for as equity transactions.
Results of Operations
The following tables set forth a summary of our consolidated results of operations for the interim periods indicated and the changes between periods. We have derived this data from our unaudited condensed consolidated financial statements included elsewhere in this Report. The results of historical periods are not necessarily indicative of the results of operations for any future period.
Comparison of the Three Months Ended September 30, 2025 and 2024
Three Months Ended
September 30, 		Change
($ in thousands) 2025 2024 $ %
Revenue $ 277,911 $ 232,109 $ 45,802 20 %
Costs of revenue 183,466 151,414 32,052 21 %
Sales and marketing
39,043 39,252 (209) (1) %
General and administrative 25,746 26,508 (762) (3) %
Depreciation and amortization 10,188 8,471 1,717 20 %
Income from operations 19,468 6,464 13,004 201 %
Interest income, net 2,555 2,049 506 25 %
Income before income taxes 22,023 8,513 13,510 159 %
Income tax expense
7,177 5,274 1,903 36 %
Net income $ 14,846 $ 3,239 $ 11,607 358 %
Revenue. Revenue increased by $45.8 million, or 20%, to $277.9 million for the three months ended September 30, 2025 as compared to $232.1 million for the same period in 2024. The increase was mainly due to and directly correlated with our continued growth across existing markets. The increase reflects higher period-over-period online casino and sports betting revenue and social gaming revenue of $45.9 million and $0.1 million, respectively, which was partially offset by a decrease in retail sports betting revenue of $0.2 million.
Costs of Revenue.Costs of revenue increased by $32.1 million, or 21%, to $183.5 million for the three months ended September 30, 2025 as compared to $151.4 million for the same period in 2024. The increase was mainly due to and directly correlated with our continued growth as noted above. Gaming taxes, market access costs, payment processing costs and operating expenses contributed $15.6 million, $8.7 million, $5.8 million and $2.7 million, respectively, to the period-over-period increase in costs of revenue. Costs of revenue as a percentage of revenue increased to 66% for the three months ended September 30, 2025 as compared to 65% for the same period in 2024.
Sales and Marketing.Sales and marketing expense decreased by $0.2 million, or 1%,to $39.0 million for the three months ended September 30, 2025 as compared to $39.2 million for the same period in 2024. The decrease was primarily driven by reduced marketing spend resulting from management's strategy to rationalize marketing spend as the North American and Latin American online gaming industries continue to mature, which was partially offset by higher marketing personnel costs and share-based compensation expense. Sales and marketing expense as a percentage of revenue decreased to 14% for the three months ended September 30, 2025 as compared to 17% for the same period in 2024.
General and Administrative.General and administrative expense decreased by $0.8 million, or 3%, to $25.7 million for the three months ended September 30, 2025 as compared to $26.5 million for the same period in 2024. The decrease was primarily due to lower share-based compensation expense. General and administrative expense as a percentage of revenue decreased to 9% for the three months ended September 30, 2025 as compared to 11% for the same period in 2024.
Depreciation and Amortization.Depreciation and amortization expense increased by $1.7 million, or 20%, to $10.2 million for the three months ended September 30, 2025 as compared to $8.5 million for the same period in 2024. The increase was mainly due to additional costs to acquire internally developed software and other definite-lived intangible assets. Depreciation and amortization expense as a percentage of revenue remained flat at 4% for the three months ended September 30, 2025 and 2024.
Interest Income, Net.Interest income, net, increased by $0.5 million, or 25%, to $2.5 million for the three months ended September 30, 2025 as compared to $2.0 million for the same period in 2024. The increase in interest income was mainly attributed to higher amounts of cash held in interest-bearing accounts and money market funds as compared to the same period in 2024.
Income Tax Expense. Income tax expense increased by $1.9 million, or 36%, to $7.2 million for the three months ended September 30, 2025 as compared to $5.3 million for the same period in 2024. Income tax expense is primarily attributable to the profitability of our foreign operations for which both current and deferred taxes are recorded. Income tax expense as a percentage of revenue increased to 3% for the three months ended September 30, 2025 as compared to 2% for the same period in 2024.
Comparison of the Nine Months Ended September 30, 2025 and 2024
Nine Months Ended
September 30, 		Change
($ in thousands) 2025 2024 $ %
Revenue $ 809,535 $ 669,916 $ 139,619 21 %
Costs of revenue 528,496 440,414 88,082 20 %
Sales and Marketing
118,314 114,600 3,714 3 %
General and administrative 74,505 79,582 (5,077) (6) %
Depreciation and amortization 29,506 23,127 6,379 28 %
Income from operations 58,714 12,193 46,521 382 %
Tax receivable agreement expense
(113,037) - (113,037) 100 %
Interest income, net 6,435 5,525 910 16 %
(Loss) Income before income taxes (47,888) 17,718 (65,606) (370) %
Income tax (benefit) expense
(102,775) 16,970 (119,745) n/m
Net income $ 54,887 $ 748 $ 54,139 n/m
*n/m means not meaningful
Revenue. Revenue increased by $139.6 million, or 21%, to $809.5 million for the nine months ended September 30, 2025 as compared to $669.9 million for the same period in 2024. The increase was mainly due to and directly correlated with our continued growth across existing markets and expansion into new markets. The increase reflects higher period-over-period online casino and sports betting revenue of $139.9 million and social gaming revenue of $0.4 million, which was partially offset by a decrease of retail sports betting revenue of $0.7 million.
Costs of Revenue.Costs of revenue increased by $88.1 million, or 20%, to $528.5 million for the nine months ended September 30, 2025 as compared to $440.4 million for the same period in 2024. The increase was mainly due to and directly correlated with, our expansion and continued growth as noted above. Gaming taxes, market access costs, operating expenses and payment processing costs contributed $37.3 million, $27.5 million, $9.0 million and $5.8 million, respectively, to the period-over-period increase in costs of revenue. Personnel costs contributed to the remainder of the period-over-period increase. Costs of revenue as a percentage of revenue decreased to 65% for the nine months ended September 30, 2025 as compared to 66% for the same period in 2024.
Sales and Marketing.Sales and Marketing expense increased by $3.7 million, or 3%, to $118.3 million for the nine months ended September 30, 2025 as compared to $114.6 million for the same period in 2024. The increase was primarily driven by higher marketing personnel costs and share-based compensation expense, which was partially offset by reduced marketing spend resulting from management's strategy to rationalize marketing spend as the North American and Latin American online gaming industries continue to mature. Sales and marketing expense as a percentage of revenue decreased to 15% for the nine months ended September 30, 2025 as compared to 17% for the same period in 2024.
General and Administrative.General and administrative expense decreased by $5.1 million, or 6%, to $74.5 million for the nine months ended September 30, 2025 as compared to $79.6 million for the same period in 2024. The decrease was primarily due to lower share-based compensation expense and other administrative costs. General and administrative expense as a percentage of revenue decreased to 9% for the nine months ended September 30, 2025 as compared to 12% for the same period in 2024.
Depreciation and Amortization.Depreciation and amortization expense increased by $6.4 million, or 28%, to $29.5 million for the nine months ended September 30, 2025 as compared to $23.1 million for the same period in 2024. The increase was mainly due to additional costs to acquire internally developed software and other definite-lived intangible assets. Depreciation and amortization expense as a percentage of revenue increased to 4% for the nine months ended September 30, 2025 as compared to 3% for the same period in 2024.
Tax Receivable Agreement Expense.Tax receivable agreement expenses increased by $113.0 million for the nine months ended September 30, 2025 as compared to nil for the same period in 2024. The increase is associated with our initial recognition of a TRA liability upon realization of future tax benefits associated with the TRA.
Interest Income, Net. Interest income increased by $0.9 million, or 16%, to $6.4 million for the nine months ended September 30, 2025 as compared to $5.5 million for the same period in 2024. The increase in interest income was mainly attributed to higher amounts of cash held in interest-bearing accounts and money market funds as compared to the same period in 2024.
Income Tax Expense (Benefit). Income tax benefit was $102.8 million for the nine months ended September 30, 2025 as compared to income tax expense of $17.0 million for the same period in 2024. Income tax benefit is primarily attributable to the release of a valuation allowance as it is more likely than not that some portion of the deferred asset may be realized.
Seasonality and Other Trends Impacting Our Business
Our results of operations may, and generally do, fluctuate due to seasonal trends and other factors such as level of customer engagement, online casino and sports betting results and other factors that are outside of our control or that we cannot reasonably predict. Our quarterly financial performance depends on our ability to attract and retain customers. Customer engagement in our online offerings may vary due to, among other things, customer satisfaction with our platform, the number, timing and type of sporting events, the length of professional sports seasons, our offerings and marketing efforts and those of our competitors (including those not just in the online gaming industry but also in prediction markets or in the entertainment industry broadly), other forms of entertainment available to our customers, weather conditions, public sentiment, an economic downturn or other economic factors such as inflation, economic uncertainty or macroeconomic conditions. As customer engagement varies, so may our quarterly financial performance.
Our quarterly financial results may also be impacted by the number and amount of betting losses and jackpot payouts we experience. Although our losses are limited per wager to a maximum payout, when looking at bets across a period of time, these losses can be significant. We offer progressive jackpot games in our online casino offerings. Each time a customer plays a progressive jackpot game, we contribute a portion of the amount bet to the jackpot for that game or group of games. When a progressive jackpot is won, it is paid out and reset to a predetermined base amount. Winning the jackpot is determined by a random mechanism; we cannot foresee when a jackpot will be won, and we do not insure against jackpot payouts. Paying the progressive jackpot decreases our cash position.
Our online and retail sports betting operations experience seasonality based on the relative popularity and frequency of certain sporting events. Although sporting events occur throughout the year, our online sports betting customers are most active during the NFL, NBA, college football and basketball seasons. With respect to our online and retail sports betting operations, customer activity tends to increase, and we may experience increased volatility, in connection with major sporting events such as the NFL super bowl, the NBA finals and NCAA basketball March Madness. In addition, sports betting activity is impacted by the occurrence of periodic events (e.g., World Cup, Copa América, UEFA, Olympics).
From a legislative perspective, we continue to see strong momentum to legalize and regulate online sports betting in new jurisdictions in the Americas. As expected, many of these new jurisdictions are first trying to legalize and regulate online sports betting before considering whether to legalize and regulate online casino. However, given the tax generation success of online casino in markets where it has been legalized, we also continue to see strong momentum for online casino in several jurisdictions in the Americas that are looking for additional revenue sources to fund expanding budgets. Additionally, we have seen governmental officials or legislative or regulatory bodies in certain jurisdictions in which we operate consider, and in limited cases to date, approve, increases in gaming-related taxes or other types of taxes on companies operating in the gaming industry. While it is unclear at this time if this will continue, any proposed legislation or other similar actions to increase existing taxes on online sportsbook and/or casino could negatively impact our business, profitability and cash flows.
We operate within the global gaming and entertainment industry, which is comprised of diverse products and offerings that compete for consumers' time and disposable income. We face and expect to continue to face significant competition from other industry players both within existing and new markets including from competitors with access to more resources, existing assets such as brands or databases, or experience. Customer demands for new and innovative offerings and features require us to continue to invest in new technologies, features and content to improve the customer experience. Many jurisdictions in which we operate or intend to operate in the future have unique regulatory and/or technological requirements, which require us to have robust, scalable networks and infrastructure, and agile engineering and software development capabilities. The global gaming and entertainment industry has seen significant consolidation, regulatory change and technological development over the last few years, and we expect this trend to continue into the foreseeable future, which may create opportunities for us but may also create competitive and margin pressures. We are starting to see some other online gaming operators rationalize their marketing spend in North American jurisdictions, although their
marketing spend may vary by quarter depending on, among other things, sports calendars, new market launches and prior commitments.
Liquidity and Capital Resources
Our principal sources of liquidity are cash on hand and cash flows from operations. We regularly monitor our liquidity position, working capital needs and capital allocation strategy to ensure we maintain adequate resources to support our business operations, fund strategic initiatives and fulfill other corporate and contractual obligations, including those under our TRA and the amended and restated partnership agreement of RSILP (the "A&R Partnership Agreement").
As of September 30, 2025, we had $273.5 million in cash and cash equivalents, excluding legally restricted customer cash deposits that we segregate from our operating cash balances. We intend to continue to finance our operations without third-party debt and entirely from operating cash flows and cash on our balance sheet.
Our current working capital needs relate mainly to supporting our existing businesses, the growth of these businesses in their existing markets and their expansion into other geographic regions, as well as our personnel's compensation and benefits. We expect our material cash requirements during the upcoming 12-month period to include $19.3 million of non-cancellable purchase obligations with marketing vendors, $4.1 million of minimum license and market access fees, and $2.8 million of lease payments. We also have $54.7 million of additional non-cancellable purchase obligations that will be due subsequent to the upcoming 12-month period. In addition, we will continue to pursue expansion into new markets, which is expected to require significant capital investments.
We are required to make payments equal to 85% of the tax benefits we realize in connection with the TRA. These obligations under the TRA, while mainly non-current in nature, reduce future operating cash flows as the associated tax benefits are realized. Although the actual timing and amount of any payments made under the TRA will vary, such payments may be significant. Any payments made under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us and, to the extent that payments required under the TRA are unable to be made for any reason, the unpaid amounts generally will be deferred and will accrue interest until paid. To date, no material payments under the TRA have been made. Payments associated with the TRA liability are expected to include $1.1 million in the next 12 months and additional obligations of $122.9 million are expected subsequent to the upcoming 12-month period.
RSILP is a partnership for U.S. federal income tax purposes and, as such, taxable income will be allocated for U.S. federal income tax purposes to the holders of RSILP Units. The A&R Partnership Agreement requires RSILP to make tax distributions to holders of RSILP Units (including the Special Limited Partner) calculated at certain assumed rates. In some cases, these assumed rates may be significantly higher than the holders' actual tax rates. The amount of these tax distributions can be significant, in particular as RSILP's profitability increases, which will generally reduce the amount of overall cash flow that might have otherwise been available to us. To date, no material tax distribution payments have been made, and no material payments thereunder are expected in the next 12 months.
We expect our existing cash and cash equivalents and cash flows from operations to be sufficient to fund our operating activities and capital expenditure requirements for at least the next 12 months and thereafter for the foreseeable future. It is possible that we may need additional cash resources due to changed business conditions or other developments, including unanticipated regulatory developments, significant acquisitions, partnerships or marketing initiatives, deteriorating macroeconomic conditions and competitive pressures. We expect our capital expenditures and working capital requirements to continue to increase in the immediate future to support our growth as we seek to expand our offerings across more of North America, Latin America and worldwide, which will require significant investment in our online gaming platform and our personnel, in particular in product development, engineering and operations roles. We also expect certain costs such as marketing, market access and license fees to increase to the extent we pursue expansion opportunities in new and existing jurisdictions. In particular, we are party to several non-cancelable contracts with vendors and licensors for marketing, other strategic partnerships and leases, pursuant to which we are obligated to make future minimum payments under the non-cancelable terms of these contracts. Additionally, our continued profitability will trigger future quarterly tax distribution obligations payable to the limited partners of RSILP under the A&R Partnership Agreement. To the extent that our current resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. If the needed financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in new product, service or market launches and related marketing initiatives or to scale back our existing operations, which could have an adverse impact on our business and financial prospects.
Surety Bonds
We had been issued $31.3 million and $31.1 million in surety bonds as of September 30, 2025 and December 31, 2024, respectively, that are used to satisfy regulatory requirements related to securing cash held for the benefit of customers.
We had been issued $6.5 million and $6.1 million in surety bonds as of September 30, 2025 and December 31, 2024, respectively, 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.
Debt and Letters of Credit
As of September 30, 2025 and December 31, 2024, we had no outstanding debt.
As of September 30, 2025 and December 31, 2024, we had an outstanding letter of credit for $6.0 million and $4.3 million, respectively, in connection with our operations in Colombia, for which no amounts had been drawn.
Stock Repurchase Program
On October 24, 2024, our Board of Directors authorized the repurchase of an aggregate of up to $50 million of our Class A Common Stock through open market purchases, privately negotiated transactions or other transactions in accordance with applicable securities laws.
During the three and nine months ended September 30, 2025, we repurchased nil and 733,019 shares, respectively, of Class A Common Stock pursuant to the Stock Repurchase Program. The aggregate purchase price was approximately $7.6 million during the nine months ended September 30, 2025 at average prices of $10.41.
Cash Flows
The following table shows our cash flows from operating activities, investing activities and financing activities for the nine months ended September 30, 2025 and 2024:
Nine Months Ended
September 30,
($ in thousands) 2025 2024
Net cash provided by operating activities $ 95,915 $ 80,553
Net cash used in investing activities (28,867) (26,215)
Net cash used in financing activities (34,403) (682)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 12,152 (4,274)
Net change in cash, cash equivalents and restricted cash $ 44,797 $ 49,382
Operating activities. Net cash provided by operating activities for the nine months ended September 30, 2025 increased by $15.4 million to $95.9 million, as compared to $80.5 million during the same period in 2024. The increase was primarily brought by higher period-over-period net income totaling $54.1 million, which was partially offset by changes in operating assets and liabilities of $31.3 million and decreased non-cash expenses of $7.4 million. The decrease in non-cash expenses was driven primarily by deferred income tax benefit and decrease in share-based compensation expense totaling $121.6 million and $5.3 million, respectively, which was partially offset by tax receivable agreement expense totaling $113.0 million and additional depreciation and amortization totaling to $6.4 million.
Investing activities. Net cash used in investing activities for the nine months ended September 30, 2025 increased by $2.7 million to $28.9 million, as compared to $26.2 million during the same period in 2024. The increase reflects increased costs for internally developed software totaling $3.3 million and additional acquisitions of other intangible assets and developed technology totaling $0.6 million and $0.2 million, respectively. This was partially offset by lower period-over-period short-term investments, acquisition of gaming licenses and purchases of property and equipment totaling $0.8 million, $0.4 million and $0.2 million, respectively.
Financing activities.Net cash used in financing activities for the nine months ended September 30, 2025 increased by $33.7 million to $34.4 million, as compared to $0.7 million during the same period in 2024. The period-over-period increase primarily reflects the payments for employee taxes related to shares withheld, repurchases of Class A Common Stock and payments of finance lease liabilities totaling to $24.4 million, $7.6 million and $1.6 million, respectively. Decrease in proceeds from exercise of stock options contributed to the remainder of the period-over-period increase.
Effect of exchange rate changes on cash, cash equivalents and restricted cash. The effect of exchange rate changes increased cash, cash equivalents and restricted cash by $12.2 million for the nine months ended September 30, 2025 as compared to a decrease of $4.3 million for the same period in 2024. These changes were due to fluctuations in foreign currency exchange rates (primarily the Colombian Peso) from period to period.
Critical Accounting Policies and Estimates
We have prepared our unaudited condensed consolidated financial statements in accordance with GAAP. In doing so, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses during the reporting period. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an ongoing basis. Actual results may differ from these estimates. Management has discussed the development, selection and disclosure of these estimates and assumptions with the Audit Committee of the Board.
There were no material changes during the quarter ended September 30, 2025, to the critical accounting policies and estimates discussed in our Annual Report. For a more complete discussion of our critical accounting policies and estimates, refer to our Annual Report.
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