DraftKings CEO Louds the Company’s “Outstanding” Q1 in Revenue Increase!

DraftKings CEO and co-founder Jason Robins has paid tribute to the operator’s “outstanding” performance in Q1 after reporting a 52.7% year-on-year increase in revenue to $1.18bn (£936.2m/€1.09bn).

Revenue for the three months to March 31 is $405 million, above the $769.7 million posted by DraftKings in Q1 of 2023.

Looking back over the quarter, Robins believes that this growth is due to; continued customer engagement, the acquisition of new players, expanding its sportsbook into new jurisdictions, a higher structural sportsbook hold percentage, and improved promotional reinvestment for sportsbooks and igaming.

DraftKings Power Moves in Q1!

Delving deeper into some of these developments, highlights in Q1 include launching its sportsbook in both North Carolina and Vermont. Also on the sportsbook front, DraftKings struck up a multi-year partnership with Bartstool Sports.

As for other movements, DraftKings in February agreed to acquire lottery app Jackpocket for $750m. DraftKings expects to generate an additional $340m per annum as a result of this deal.

There were also changes to the senior management team at DraftKings as it carried out a reshuffle. Jason Park stepped aside as CFO to become its first chief transformation officer, with Alan Ellingson appointed as his replacement. In addition, DraftKings named Lori Kalani as its first chief responsible gaming officer.

“DraftKings’ performance in the first quarter of 2024 was outstanding, reflecting healthy revenue growth and a scaled fixed cost structure that positions us to drive rapidly improving adjusted EBITDA,” Robins said. He added,  “Looking ahead, we remain committed to maximizing shareholder value through continued innovation, operational excellence, and disciplined capital allocation.”

Expanding customer base drives growth in Q1

A significant factor in revenue growth during Q1 was an increase in customers gambling with DraftKings via sportsbook or igaming.

Average monthly unique payers (MUPs) reached 3.4 million, up 23.0% on the same period last year. DraftKings puts this down to strong player acquisition and retention across both its sportsbook and igaming products, as well as the expansion into new markets.

In addition, average revenue per MUP was also higher year-on-year. The average for Q1 was $114, up 25.0% from 2023, as DraftKings felt the benefit of an increase in its structural sportsbook hold percentage and improved promotional reinvestment for sportsbook and igaming.

Revenue costs were up 36.1% to $710.1million although, interestingly, sales and marketing spending dipped 12.4% to $340.7million. Product and technology spending was level at $88.8million, while general and administrative costs climbed 8.6% to $174.3m.

This left an operating loss for Q1 of $138.8m, a marked improvement on last year’s $389.8m loss. An additional $4.4m in non-operating costs meant a pre-tax loss of $143.2m which, again, is far healthier than the £395.7m loss in 2023.

DraftKings received $351,000 in tax benefits and also noted a $330,000 gain from an equity investment method. As such, it ended Q1 with a net loss of $142.6m, compared to $397.1m in the previous year.

In addition, adjusted EBITDA was transformed from a loss of $221.6m to a $22.4m gain. 

DraftKings increases full-year revenue and earnings guidance!

Following the North Carolina launch in March, DraftKings is now live with mobile sports betting in 25 states. Collectively, these markets represent approximately 49.0% of the US population. 

Aside from this, DraftKings operates igaming in five states, equating to around 11.0% of the whole US population. In addition, it offers both sports betting and igaming in Ontario, Canada. 

As part of its ongoing expansion, DraftKings expects to launch in more markets, namely Puerto Rico. This remains subject to market access, licensure, regulatory approvals, and contractual approvals.

Taking all this into account, as well as its strong performance in Q1, DraftKings has taken the decision to increase full-year guidance across revenue and adjusted EBITDA.

Revenue is now set to amount to between $4.80bn and $5.00bn, up from the initial range of $4.65bn to $4.90bn. This would represent year-on-year growth of between 31.0% and 36.0%.

As for adjusted EBITDA, this is now forecast at between $460 million and $540 million, compared to the earlier guidance of $410 million to $550 million, with a midpoint of $500 million. 

DraftKings notes that these estimates are based on activities in existing jurisdictions. They do not include the estimated impact of its proposed acquisition of Jackpocket. This, it says, will be incorporated into its guidance when the deal closes.

“We are raising guidance as a result of our excellent first quarter results and improved outlook on customer acquisition and engagement for the rest of 2024,” Robins said.

What are the analysts saying?

Reflecting on the results, Truist Securities says DraftKings has proved to be a “bright spot” in what has otherwise been a “dim” Q1 season so far.

Truist notes how DraftKings was able to overcome customer-friendly results around certain major sports events, including March Madness. Other highlights acknowledged by Truist include more efficient promotional reinvestment and increased customer acquisition. 

Truist also referenced the increased guidance for the full year. Taking this into account, along with the strong Q1 showing, it is reiterating its buy rating for DraftKings. 

“The beat and raise was driven by strong fundamentals, as nearly every underlying metric continues to show meaningful improvement,” Truist said.