Business Context and Reporting Period
Rush Street Interactive, LP (RSI) disclosed information through dMY Technology Group, Inc.’s Form 8-K regarding the pending business combination. The report is dated December 11, 2020, was filed December 14, 2020, and references RSI’s three- and nine-month periods ended September 30, 2020.
The filing also announced RSI’s launch of an online casino in West Virginia through BetRivers.com. A special meeting of dMY stockholders to approve the business combination was scheduled for December 29, 2020.
Key Financial Metrics
- RSI’s projected 2020 revenue of $265 million to $275 million was trending toward the upper end of that range, assuming scheduled professional and college sporting events occurred as planned.
- The filing does not provide clear values for revenue, net income, cash flow, margins, debt, liquidity, or adjusted EBITDA for the reported periods.
- RSI stated that the accounting issue described below would not affect its previously announced projected future revenue or adjusted EBITDA.
Material Changes Versus the Prior Comparable Period
- RSI identified an approximately $9.0 million under-accrual of related-party royalty expense in costs of revenue and a corresponding overstatement of amounts due from affiliated land-based casinos for the three months ended and as of September 30, 2020.
- On December 10, 2020, an affiliated casino agreed to reduce royalty expense by $3.0 million per month for July, August, and September 2020. As a result, RSI stated that the issue had no impact on its financial statements for the nine months ended September 30, 2020.
- Absent the amendment, costs of revenue would have been $9.0 million higher and amounts due from affiliated casinos $9.0 million lower for the quarter and as of September 30, 2020.
- RSI characterized the amendment as one-time and stated that similar amendments would not occur in the future.
Guidance, Outlook, Risks, and Unusual Items
- Revenue outlook remained $265 million to $275 million for 2020, with performance dependent in part on the timing of professional and college sports events.
- The business combination remained subject to stockholder approval, regulatory approvals, other closing conditions, and potential termination rights.
- Identified risks include COVID-19, legal proceedings, inability to complete the transaction, failure to maintain post-transaction NYSE listing, integration and execution risks, competition, regulatory changes, growth management, employee retention, and transaction costs.
- The filing’s projections and other outlook statements are forward-looking and may differ materially from actual results.
Investor Verification Points
- Verify the final accounting treatment and disclosure of the $9.0 million royalty accrual and related-party receivable adjustment in RSI’s subsequent financial statements.
- Assess whether the one-time royalty amendment affected comparability of reported costs of revenue and affiliated-casino receivables.
- Verify 2020 revenue against the stated $265 million to $275 million range and determine whether sporting-event assumptions were achieved.
- Confirm completion of the business combination, required approvals, closing conditions, and post-transaction NYSE listing.
- Review the definitive proxy statement and related risk factors for additional transaction, regulatory, operating, and COVID-19 disclosures.