DraftKings raises 2023 revenue guidance again after solid Q3

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DraftKings has raised the midpoint of its 2023 guidance once again after a solid third quarter of 2023 across several metrics.

CEO and Co-Founder Jason Robins attributed the Q3 success to the “positive impact” of product and technology investments, as well as great preparation and execution.

Revenue uptick

Publishing its Q3 results, DraftKings reported a 57 per cent year-over-year increase in revenue to $790m (Q3 2022: $502m) driven by “continued healthy customer engagement, efficient acquisition of new customers”.

Sportsbook product offering expansion in new jurisdictions and product innovation leading to “increased parlay mix and thus higher hold percentage, and improved promotional reinvestment” were also highlighted as contributing factors towards the quarter’s success.

Following the launch of its Kentucky sportsbook product in September, DraftKings is live in 22 US states with mobile sports betting and has launched its igaming product in five states. The operator’s sports betting and igaming offerings are also live in Ontario, Canada.

Additional sportsbook launches are also in the works in Maine following an agreement in principle with the Passamaquoddy Tribe, and in Puerto Rico and North Carolina after DraftKings secured market access. 

After authorising mobile sports betting, Vermont is in the process of running an RFP process, for which DraftKings has submitted a bid.

Commenting on the results, Robins said: “Our fantastic third quarter results demonstrate the positive impact of our product and technology investments as well as excellent preparation and execution by our entire organisation. 

“Our new and differentiated features and functionality have created an exceptional user experience that sustains engagement for our mobile sports betting and igaming customers.” 

“DraftKings continues to acquire customers in an efficient manner, sustain customer engagement, improve its sportsbook structural hold and promotional reinvestment for sportsbook and igaming, and demonstrate fixed cost discipline.”

Jason Park, DraftKings’ Chief Financial Officer

Taking into account the new product launches, DraftKings’ average monthly unique payers has increased by 40 per cent YoY in Q3 to 2.3 million, driven by “strong unique payer retention and acquisition” across the operator’s products.

The operator’s average revenue per MUP rose as well by 14 per cent YoY to $114, due to an increase in “structural sportsbook hold rate and improved promotional reinvestment”.

Loss from operations amounted to $286.6m, an improvement on the previous year’s loss of $455m during the same quarter. Adjusted EBITDA came in at a $153.4m loss, which is also up on the Q3 2022’s loss of $264.2m.

As of September 30, cash, cash equivalents and restricted cash stood at $1.59bn, down on $1.96bn reported during the same period last year.

“DraftKings continues to acquire customers in an efficient manner, sustain customer engagement, improve its sportsbook structural hold and promotional reinvestment for sportsbook and igaming, and demonstrate fixed cost discipline,” stated Jason Park, DraftKings’ Chief Financial Officer. 

Revenue & adjusted EBITDA guidance 

Following the strong Q3, DraftKings is updating its 2023 guidance again, improving its revenue guidance to a range of $3.67bn to $3.72bn (previously $3.46bn to $3.54bn), with a midpoint of $3.695bn (previously $3.5bn), which equates to YoY growth of 64 per cent to 66 per cent.

Adjusted EBITDA guidance has also been improved, as the company now expects it to fall between a $95m loss and a $115m loss (previously $190m loss to $220m loss), with a midpoint of a $105m loss (previously $205m loss).

DraftKings has also introduced a 2024 revenue guidance range of $4.5bn to $4.8bn, equating to more than 25 per cent YoY growth based on the 2023 revenue guidance midpoint, and a 2024 adjusted EBITDA guidance of $350m to $450m.

“We expect to generate approximately $200m of positive adjusted EBITDA in the fourth quarter of 2023 based on the midpoint of our updated fiscal year 2023 guidance and look forward to sharing our multi-year outlook at our Investor Day on November 14,” noted Robins.

Park added: “We are poised for a rapid increase in adjusted EBITDA as we anticipate strong revenue growth coupled with a scaled fixed cost structure will continue. These trends provide for a long runway of margin improvement.

“Our fiscal year 2024 guidance at the midpoints of $4.65bn in revenue and positive $400m of adjusted EBITDA implies incremental year-over-year revenue growth of almost $1bn and an increase in adjusted EBITDA of more than $500m.”