DraftKings increases 2023 guidance as Q2 revenue rises 88% YoY

Image: Lori Butcher/Shutterstock

DraftKings has reported significant improvements in several metrics during the second quarter of 2023, resulting in an increase in the company’s full-year guidance.

CEO and Co-Founder Jason Robins described the results as “outstanding” as the company improved performance in revenue and net loss, as well as adjusted EBITDA for the reporting period in the positive.

DraftKings achieves positive Q2 adjusted EBITDA

Publishing its Q2 financials, DraftKings declared revenue of $875m, an 88 per cent increase compared to the previous year (Q2: 2022 $466m). Q2’s revenue was also up in comparison to Q1’s $770m.

The operator noted that the improvement was driven by “continued healthy customer retention and engagement, efficient acquisition of new customers, product innovation leading to increased parlay mix and thus higher hold percentage, and improved promotional intensity”.

Loss from operations for DraftKings improved as well to a loss of $69m, a 77 per cent change year-over-year (2022: $308.9m), while net loss dropped by 64.4 per cent to $77.3m (2022: $217.1m).

DraftKings also achieved a positive adjusted EBITDA, reporting a figure of $72.97m, in comparison to a loss of $118.1m during the same period the previous year.

The operator ended Q2 with $1.1bn of cash and cash equivalents, an increase of $26m compared to the end of Q1.

Robins noted that he was pleased with the results, adding that DraftKings is well on its way to achieving a positive adjusted EBITDA again later this year in the fourth quarter.

The CEO said: “DraftKings produced outstanding results for the second quarter of 2023. 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, and we are well on our way to achieving positive Adjusted EBITDA again in the fourth quarter of 2023 and for fiscal year 2024 and beyond.

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

Solid customer retention

In Q2, DraftKings monthly unique payers increased by 44 per cent to 2.1 million, which the company attributed to “strong unique payer retention and acquisition” across its sportsbook and igaming products, as well as expanding into new jurisdictions.

Average revenue per MUP rose YoY too, by 33 per cent to $137, which the operator attributes to “improvement in the company’s structural sportsbook hold rate and reduced promotional intensity”.

DraftKings’ mobile sports betting is operational in 21 states, while igaming is live in five states. Both services are also available in Ontario, Canada.

The operator expects to expand its online sports betting operations into Kentucky, North Carolina, Vermont and Puerto Rico later this year. Kentucky will launch on September 28, while the other three jurisdictions are pending licensure and regulatory approvals, as well as market access in North Carolina and Vermont.

DraftKings also noted that it is “exploring and deploying” AI and machine learning models to improve revenue and operation efficiency, while the migration of Golden Nugget Online Gaming onto its technology stack is “on track”.

CFO Jason Park noted: “We are acquiring new customers efficiently while simultaneously retaining and monetising our existing players through rapid product innovation, less promotions, and higher hold from better bet mix. 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 the second quarter, resulted in an inflection to positive Adjusted EBITDA that we expect will occur again in the fourth quarter and for full year 2024.”

2023 guidance raised

As a result of the Q2 performance, Park added that DraftKings would be increasing the midpoint of its 2023 revenue guidance from $3.185bn to $3.5bn, as well as raising the midpoint of adjusted EBITDA guidance from a $315m loss to a $205m loss.

The updated revenue guidance of $3.46bn to $3.54bn (previously $3.135bn to $3.235bn) represents a YoY growth of 54 per cent to 58 per cent. Meanwhile, adjusted EBITDA guidance has been updated to between $190m loss to $220m loss (previously $290m loss to $340m loss).

Other contributing factors to the guidance change include stronger customer retention and engagement, structural sportsbook hold improvement, favourable sports outcomes, Kentucky’s online sports betting launch and the change in online sports betting tax rate in Ohio.

In its projections for Q4, DraftKings also expects to generate $150m to $175m of adjusted EBITDA and nearly $1.2bn in revenue.