Rush Street Interactive (RSI) has been quietly building a powerful foundation in Latin America, and recent earnings transcripts suggest they might be on the verge of a significant regional expansion that has flown under the radar of most analysts. While their North American operations are performing admirably, showing strong revenue growth and consistent profitability, the real story may be brewing south of the border.

RSI's Q1 2024 earnings call reveals a company firing on all cylinders. Revenue hit a record $217 million, a 34% year-over-year jump fueled by both iCasino and online sports betting growth exceeding 35%. Their newest market, Delaware, is exceeding expectations, generating a GGR run rate nearing $70 million, and even mature markets like Michigan, New Jersey, and Pennsylvania are showing renewed vigor.

However, peel back the layers of their North American success and a more intriguing narrative emerges. RSI is strategically positioning itself to become a dominant force in the burgeoning Latin American iGaming market. The evidence lies not just in their strong financial performance in Colombia and Mexico, but in their meticulous approach to market entry and expansion.

Consider this: RSI's revenue contribution from markets outside of Illinois and Pennsylvania has climbed to 57%, up from 47% a year ago. This shift towards higher-margin markets, coupled with continued marketing efficiency, has propelled them to record EBITDA of $17 million, a $26 million improvement year-over-year. These impressive gains are in part due to the success of their Latin American operations.

Revenue Contribution by Region

The table below showcases the shift in RSI's revenue contribution, highlighting the growing importance of markets outside of Illinois and Pennsylvania.

RSI's LatAm MAUs surged 72% year-over-year in Q1, reaching 224,000, demonstrating the brand's resonance with players. This user growth wasn't achieved at the expense of player value either, as ARPMAU also increased in the region. Furthermore, Mexico, their latest LatAm venture, has already achieved profitability on a contribution basis, echoing the success they've seen in Colombia.

Latin America: Monthly Active Users (MAU) Growth

What's fascinating, however, is the strategic nuance underpinning this success. RSI isn't simply throwing money at the market. They are taking a long-term approach, carefully building infrastructure, localizing their technology, and cultivating relationships. This methodical strategy has allowed them to weather the storm of aggressive marketing spend from global competitors entering the Colombian market, demonstrating the robustness of their approach.

Now, with Brazil legalizing both online casino and sports betting, RSI is poised to capitalize on a massive market opportunity. Their five-year journey in Colombia, where they've reportedly become the second largest operator despite starting with "essentially nothing," provides a compelling blueprint for their Brazilian ambitions. They are already actively evaluating the Brazilian regulatory landscape and preparing to leverage their technology and experience in this potentially lucrative market.

In addition to Brazil, RSI has its sights set on Peru, a market with strong adjacencies to Colombia and significant brand recognition due to shared media markets. They anticipate launching in Peru later this summer, further expanding their LatAm footprint.

Here's the potential hypothesis that many may be missing: RSI is prioritizing LatAm expansion over aggressive pursuit of sports-betting-only markets in North America. Their 2024 revenue guidance of $810 million to $860 million and EBITDA of $50 million to $60 million only include existing markets, notably excluding both Peru and Brazil. If these launches are successful, and their historical performance suggests they will be, RSI's actual results could significantly exceed current expectations.

Let's delve into some potential numbers. Brazil, with a population exceeding 200 million, and Peru, with around 35 million, combined represent a potential addressable market exceeding 425 million when added to their existing Mexican and Colombian player base. Assuming even a modest share of this market, RSI could be looking at an additional $1 billion or more in annual revenue in the coming years.

RSI's focus on building a strong, localized foundation in LatAm is a strategic masterstroke. While their North American operations continue to deliver strong growth, their patient, methodical approach to LatAm expansion positions them to capture a potentially outsized share of a massive, high-growth market. Investors overlooking this Latin American power play may be in for a very pleasant surprise in the years to come.

"Fun Fact: Despite being relatively new to the Latin American market, RSI has quickly gained traction. In Colombia, they reportedly achieved the #2 market share position in just five years, demonstrating the effectiveness of their localized approach."