DraftKings raised full-year guidance for revenue and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) following growth in the first quarter of its 2023 financial year.
The operator said efficient acquisition of new customers, product innovation driving higher hold percentage, decreased promotional intensity in more mature states and continued healthy customer retention helped drive revenue up year-on-year in the three months to March 31.
DraftKings was also helped by the launch of its online sports betting product in the states of Massachusetts and Ohio, bringing the total number of states in which it is live with wagering to 21. The operator also runs igaming in five states and has a presence with both offerings in Ontario in Canada.
As such, DraftKings was able to increase its full-year guidance, having previously raised its expectations following a positive final quarter of 2022.
“We delivered highly successful online sportsbook launches in Ohio and our home state of Massachusetts and continued to create meaningful product differentiation driven by in-house innovations,” DraftKings’ co-founder and chief executive Jason Robins said. “We acquired customers faster and more efficiently and, importantly, saw healthy retention across cohorts.
“Looking at the remainder of 2023, I am confident DraftKings is well-positioned to achieve profitability on an adjusted EBITDA basis in the near-term and deliver long-term value for our shareholders.”
Q1 results
Revenue for the first quarter amounted to $769.7m, an increase of 84.5% from $417.2m in the previous year.
Monthly unique payers (MUPs) increased by 39.0% to 2.8 million, which the operator said reflected strong unique payer retention and acquisition across its sportsbook and igaming products, as well as the expansion of its products into new jurisdictions.
DraftKings also noted that the average revenue per monthly unique player (ARPMUP) reached $92 in the first quarter of 2023, a 35% increase on the same period in 2022. The operator put this down to improvement in its structural sportsbook hold rate and reduced promotional intensity.
Turning to spending, expenses were higher in almost all areas, with the main outgoing being cost of revenue at $521.7m, up 66.5% year-on-year. Sales and marketing costs and product technology expenses also increased, though general and administrative spend was reduced.
This left an operating loss of $389.8m, though this was a significant improvement on the $515.6m loss posted in the previous year. After also including $5.9m in net finance costs, pre-tax loss was $395.7m, compared to $464.9m in 2022.
DraftKings paid $1.4m in tax and also accounted for a $119,000 loss from equity method investment, meaning net loss in Q1 was $397.1m, an improvement on $467.7m last year. In addition, adjusted EBITDA loss shorted from $289.5m to $221.6m.
The improvements led to an increase in full-year guidance, with revenue now expected to reach between $3.14bn and $3.24bn, up from the $2.85bn to $3.05bn range initially set at the end of Q4 2022.
In addition, adjusted EBITDA expectations have been raised from between a loss of $350.0m and $450.0m to a loss range of $290.0m to $340.0m.
“Strong execution across the organization is showing up in our results,” DraftKings chief financial officer Jason Park said. “Revenue grew at a healthy rate due to core drivers around customer acquisition, retention and monetization, including decreased promotional intensity and higher structural hold.
“In addition, our efficiency efforts produced clear results as demonstrated by significant year-over-year increases in gross margin and adjusted EBITDA.”