The chief executive officer of DraftKings Inc. says they have high expectations for their sports betting site in the second half of 2023.
During a conference call for analysts and investors on Friday, DraftKings CEO Jason Robins talked up the Boston-based bookmaker’s expanding menu for legal sports betting, namely, its enhancements to its same-game parlays and live-wagering options.
Those improvements helped drive DraftKings’s share of online sports betting handle and gross gaming revenue in the states in which it operated to 35% and 32%, respectively, during the three months that ended June 30, up from 27% and 20% a year earlier. The handle and revenue were the highest they’ve been since the second quarter of 2020, Robins noted, with DraftKings registering an online sports betting win rate of around 9% for the quarter.
“In H2, we feel we're going to have the best product in the market,” Robins said during the call.
DK's Q2 call now over. To sum it up:
— Geoff Zochodne (@GeoffZochodne) August 4, 2023
-Jump in revenue and adj. EBITDA, as well as guidance for same
-Embrace of same-game parlay paying off, predicting product will be best around in H2 2023
-$10M hit in Ohio coming due to tax hike
-Gonna burn $30M in EBTIDA on Kentucky launch pic.twitter.com/UGXhHkxT5K
The comments came after DraftKings reported its financial results for the second quarter, which ended June 30. The Boston-based bookmaker reported $874.9 million in revenue for the three months, up from $466.2 million a year earlier. As a result, its net loss for the quarter dropped to $77.3 million from $217.1 million. DraftKings has lost more than $474.4 million for 2023, less than the $684.8 million it had lost halfway through 2022.
“Our revenue-growth trajectory has been very strong due to our continued focus on enhancing our product and improving our customer experience, which is driving excellent retention and rapidly improving monetization,” Robins said on Friday.
Getting people to place more same-game parlays and in-play action is key to the strategy of DraftKings and other online bookmakers, as bettors lose them more than they do straight bets. So, while customers may be drawn to the idea of betting a little to possibly win a lot, it winds up being good business for operators that are striving for profitability, like DraftKings.
Indeed, after adjusting for a handful of items, such as legal costs and stock-based compensation, DraftKings' earnings before interest, taxes, depreciation, and amortization (EBITDA) were nearly $73 million, compared to negative $118.1 million for Q2 of 2022. The company reported a 44% year-over-year increase in average monthly unique paying customers as well, to 2.1 million as of the second quarter.
A bright future
DraftKings is also predicting an even brighter future for itself. The operator raised its 2023 guidance for revenue and lowered its projected adjusted EBITDA loss to a range of $3.46 billion to $3.54 billion (it was previously $3.135 billion to $3.235 billion) and between negative $190 million and $220 million (it was previously between negative $290 million and $340 million), respectively.
The company is now forecasting positive adjusted EBITDA of between $150 million to $175 million in the fourth quarter of 2023, in addition to nearly $1.2 billion in revenue. That forecast includes the effects of launches in Kentucky and Puerto Rico that are scheduled to happen by then, among other things.
DraftKings expects its Kentucky sports betting launch, which could happen before the end of September, will generate about $20 million more in revenue for 2023, but cost it $30 million in adjusted EBITDA. Meanwhile, an increase in the Ohio sports betting tax rate to 20% from 10% is expected to cost the company around $10 million in adjusted EBITDA this year.
Those headwinds will be offset somewhat by a projected $30-million boost to adjusted EBITDA caused by DraftKings' parlay and in-game efforts, as well as another $20 million worth of "favorable" sports outcomes in the second quarter.
Shares of DraftKings were up around 3.7% as of midday on Friday, to more than $31 apiece.
“The quarter continues to raise the level of performance potential and therefore the upside in the shares,” analysts at investment bank Jefferies wrote in a note to clients regarding the latest DraftKings results. “We believe the quarter supports our thesis in digital that operators are pivoting from investment spending to profits through product advancement and that this transition has more room to evolve.”
