DraftKings further increases full-year guidance after Q2 growth

DraftKings has increased its full-year revenue and earnings guidance after reporting growth during both its second quarter and first half.

The operator put Q2 success down to continued customer retention and engagement, as well as the acquisition of new players. DraftKings also highlighted an expanded parlay offering and improved promotional intensity.

This led to a year-on-year rise in revenue and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA). DraftKings was also able to reduce net loss.

Based on these figures, the operator was confident in increasing FY guidance for the third consecutive quarter. DraftKings already raised FY expectations in both the first quarter of 2023 and final quarter of last year.

DraftKings also took into account anticipated launches in new markets when increasing its FY guidance. The operator expects to go live in Kentucky in September and Puerto Rico before the end of the year, with these launches set to further improve financial performance.

“DraftKings produced outstanding results for the second quarter of 2023,” DraftKings’ co-founder and CEO, Jason Robins, said. “We grew revenue at an impressive year-over-year rate, captured additional GGR share in a cost-effective manner and maintained our focus on operational efficiency.

“The positive adjusted EBITDA that we generated in the second quarter exceeded our guidance. We are well on our way to achieving positive adjusted EBITDA in the fourth quarter, fiscal year 2024 and beyond.

“We are excited by the additional product features and functionality that we are introducing leading into football season. I also look forward to another successful online sportsbook launch in Kentucky this fall pending licensure and regulatory approvals.”

DraftKings Q2 revenue jumps 88%

Looking at DraftKings’ Q2 performance, revenue for the three months to 30 June reached $874.9m. This was 87.7% higher than $466.2m in the same period last year.

User acquisition efforts led to average monthly unique players (MUPs) jumping 44.0% year-on-year in Q2 to 2.1 million. Average revenue per MUP was also some 33.0% higher at $137 (£108/€125) for the quarter.

The revenue rise was accompanied by an increase in spending across almost all areas. The primary outgoing was cost of revenue at $510.3m, up 63.1% year-on-year. Expenses for sales and marketing and product and technology were also higher, but general and administrative spend was down.

DraftKings Q2 operating loss was $69.0m but this was significantly lower than the $308.9m loss posted at the same point in 2022. The operator noted an additional $7.3m in net finance costs, leaving a pre-tax loss of $76.3m. However, again, this was much less than $298.3m last year.

After also accounting for $651,000 in income tax and a $323,000 loss from equity method investment, net loss hit $77.3m, down from $217.1m in the previous year. In addition, the operator turned an adjusted EBITDA loss of $118.1m in 2022 to a positive of $73.0m.

Net loss slashed by $210m in H1

Tuning to the first half and revenue for the six months to 30 June hit $1.64bn, up 97.3% on last year.

Spending made for similar reading, with all costs besides general and administrative rising year-on-year. Cost of revenue surpassed the $1.00bn mark to reach $1.03bn, while sales and marketing spend was $596.6m.

However, the revenue rise meant operating loss was reduced from $824.5m to $458.8m. A further $13.1m in net finance costs meant pre-tax loss amounted to $472.0m, again lower than the previous year.

DraftKings paid $2.0m in tax and made a $442,000 loss from equity method investment. As such, net loss for the half was $474.4m, down from $684.8m in 2023. In addition, adjusted EBITDA came in at a loss of $148.6m, an improvement on the $407.6m loss last year.

Higher expectations for full year

Raising its full-year guidance, DraftKings said it now expects revenue to be within a range of $3.46bn to $3.54bn. This is higher than the range of $3.14bn to $3.24bn set after Q1 and would put year-on-year growth between 54% and 58%.

Adjusted EBITDA loss is forecast to be $190.0m to $220.0m, compared to Q1’s guidance of $290.0m to $340.0m.

Looking at the fourth quarter in particular, DraftKings said revenue is likely to reach almost $1.2bn and adjusted EBITDA between $150.0m and $175.0m.

The operator noted the guidance includes all existing jurisdictions where it is live plus Kentucky and Puerto Rico.

“We are acquiring new customers efficiently while simultaneously retaining and monetising our existing players through rapid product innovation, fewer promotions and higher hold from better bet mix,” DraftKings’ CFO, Jason Park, said.

“Our unit economics are outstanding with older states generating more than enough cash to fund investment in new states. This performance combined with fixed costs that grew at only a mid-single digit year-over-year percentage rate in Q2. This resulted in an inflection to positive adjusted EBITDA that we expect will occur again in the fourth quarter and for full-year 2024.”

DraftKings’ failed PointsBet offer

Q2 also saw DraftKings momentarily enter the running to acquire the US operations of PointsBet.

DraftKings tabled an unsolicited non-binding indicative proposal worth $195.0m in June. This came just weeks after Fanatics announced plans to acquire PointsBet’s US business.

The proposal led to strong criticism from the ecommerce giant’s CEO, Michael Rubin, who said he was “sceptical” of the move. He added that it was a “desperate” attempt to slow progress on Fanatics’ own deal with PointsBet.

PointsBet said it would engage with DraftKings after determining the proposition could be “superior” to Fanatics’ bid. However, after Fanatics returned with an improved proposal worth $225.0m later in the month, DraftKings withdrew from the race.

Should the Fanatics deal complete as expected, it would grant the business access to 12 states. Among those are major betting and igaming hubs New York, New Jersey, Pennsylvania and Michigan.

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