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DraftKings raises full-year revenue and earnings guidance after Q3 success

| By Robert Fletcher
DraftKings has increased its full-year revenue and adjusted EBITDA guidance after reporting significant growth during the third quarter.
DraftKings CFO management

This is the third consecutive quarter this year in which DraftKings has raised guidance for its full year. The operator posted revenue and adjusted EBITDA growth in Q3, while net loss was also reduced.

Stand-out highlights for DraftKings in Q3 include the launch of its sportsbook product in the state of Kentucky. This took place late in the quarter, with DraftKings now live with mobile sports betting in 22 US states.

Meanwhile, monthly unique players (MUPs) increased 40.0% to 2.3 million in Q3. This, the operator says, reflects strong unique player retention and acquisition across sportsbook and igaming, as well as the expansion of its sportsbook into new jurisdictions.

In addition, average revenue per MUP was 14.0% higher at $114. DraftKings put this down to structural sportsbook hold rate and improved promotional reinvestment for sportsbook and igaming.

All this contributed to revenue and earnings growth in Q3. CEO and co-founder Jason Robins says this, combined with DraftKings’ performance in preceding quarters, was enough for it to again raise full-year guidance.

“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,” Robins said. 

“Our new and differentiated features and functionality have created an exceptional user experience that sustains engagement for our mobile sports betting and igaming customers. We also delivered another successful online sportsbook launch in Kentucky. In addition, we look forward to launches in Maine and in North Carolina, pending licensure and regulatory approvals.”

DraftKings remains in the red despite 57.4% revenue rise in Q3

Looking at the figures for the three months to 30 September, revenue was 57.4% higher at $790.0m (£647.4m/€743.2m). 

DraftKings did not publish a full revenue breakdown but did go into more detail regarding its costs. Cost of revenue hiked 129.0% to $372.7m, although sales and marketing spend was cut by 2.6% to $313.3m. Product and technology spend climbed 16.6% to $89.0m but general and administrative costs were 29.8% down at $130.8m.

After also accounting for $4.8m in net other income, pre-tax loss of $281.8m was a significant improvement on the $447.3m loss posted in Q3 last year.

DraftKings paid $1.3m in tax, meaning net loss was $283.1m, much lower than $450.5m in Q3 of 2022. In addition, adjusted EBITDA loss was reduced from $264.2m to $253.4m.

Year-to-date revenue falls just short of $2.50bn

Revenue for the nine months to 30 September was 75.7% higher year-on-year at $2.43bn. Costs were higher across all areas, with the exception of general and administrative. The main outgoing for DraftKings was cost of revenue at $1.58bn, up 57.8%.

Net other expenses hit $8.3m, meaning pre-tax loss totalled $753.8m, an improvement on $1.21bn in 2022. DraftKings paid $3.3m in tax and accounted for a $450,000 loss from equity investment method.

As such, net loss for Q3 hit $757.5m, in contrast to last year’s $1.14bn loss. Adjusted EBITDA loss also improved from $671.9m to $302.1m.

Revenue could hit $3.72bn in full year

Based on its Q3 and year-to-date performances, DraftKings has raised full-year forecasts. Revenue is now expected to be in a range of $3.67bn to $3.72bn, up from guidance of $2.46bn to $3.54bn set in Q2.

As for adjusted EBITDA guidance, this is now set at a loss of between $95.0m and $115.0m. Previously, this was stated as a range of $190.0m to $220.0m.

Looking further ahead, DraftKings says fiscal year 2024 revenue could be between $4.50bn and $4.80bn. The midpoint of this range would be 25.0% higher than the midpoint of 2023’s guidance.

In addition, DraftKings says it expects to become adjusted EBITDA-positive in 2024. It has set initial guidance of between $350.0m and $450.0m. 

“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,” chief financial officer Jason Park said.

“As a result of our outstanding performance in the third quarter, we are raising the midpoint of our fiscal year 2023 revenue guidance. We are also improving the midpoint of our fiscal year 2023 adjusted EBITDA guidance. 

“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.”

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