In the cutthroat world of online gambling, Jason Robins has continually welcomed fierce competition.
Following a quarter when formal launch date on Thursday, but DraftKings made news of its own just a few hours later.
After trailing archnemesis sports betting and iGaming market share of approximately 33%, ascending to the top of the podium, according to company internal metrics. The announcement coincides with a strong quarter in which the company reported double-digit top-line growth in numerous categories.
While Robins took a victory lap of sorts on Friday’s earnings conference call, he promised DraftKings would not rest on its laurels.
“I’m really excited about 2023 shaping up to be an excellent year for DraftKings. I’m equally if not more excited about 2024 and beyond,” said Robins, while alluding to the company’s quest to attain full-year profitability for the first time ever.
Bring it on 4c3956
The formal debut of New York, the country’s steady leader in monthly handle.
Fanatics, which received a he expects that platform to surge to the top.
Also on Thursday, ESPN offered a glimpse of the integrations it plans to employ when the network sent an alert to app subscribers on potential World Series odds for 2024. Attempting to assuage any concerns from investors, Robins reminded shareholders that DraftKings has already faced “multiple waves of new operators deploying marketing and promotional dollars upon launch.” In a six-page letter to shareholders, Robins avowed that DraftKings looks forward to competing against the new entrants as well as the current operators.
First integration I've seen of the soon to be launched ESPN Bet and the existing ESPN App. $PENN pic.twitter.com/LLgZNhiHci
— Chris Lynch (@ChrisLynchNJ) November 2, 2023
On Friday, Robins fielded numerous questions from Wall Street analysts on how DraftKings plans to respond to the new participants. Asked if DraftKings has given consideration to reallocating marketing spend in 2024 due to the arrival of the newcomers, Robins responded that the company vows to stay disciplined. During the quarter, DraftKings exceeded the company’s internal expectations on a metric known as “promotional reinvestment,” according to Robins. In layman’s , a company can meet those expectations by cutting back on promotional spending, then using the savings to invest in activities that may grow its business.
“We continue to expect to see a decline in promotions,” said Robins. “Last time we saw a huge wave of competition, we stayed disciplined, we didn’t increase our promotion rate. I don’t think we expect to do [differently] this time.”
Ryan Sigdahl, an equities analyst with Craig-Hallum Capital Group, does not foresee an uptick in spending on sportsbook bonuses and promotions among the current leaders. Historically, customers have shown a proclivity for accepting promos from other operators before returning to the best-in-class sportsbooks, he explained. The patterns illustrate the importance of delivering a superior product.
“I don’t expect a change in promotional intensity from the incumbents because they don’t want to win with free money, they want to win with product,” Sigdahl told Sports Handle.
Speaking at CNBC’s Global Evolve Summit that aired on Thursday, FanDuel CEO Amy Howe was also asked about the forthcoming challenges presented by ESPN BET and Fanatics. Howe echoed the sentiments on product quality.
“At the end of the day, if your product doesn’t work, it doesn’t matter how great your brand is. You [have] to have, you know, a really phenomenal experience,” she said.
Path to full-year profitability 1fd3j
DraftKings’ ascent to the top, based on state gaming reports and internal company data, is not much of a revelation. Midway through the quarter, DraftKings supplanted FanDuel as the nation’s market share leader in online gambling, a position held by FanDuel for the last several years. In August, DraftKings’ combined national market share in online sports betting (OSB) and iGaming hit 32.5%, according to Eilers & Krejcik Gaming, just ahead of FanDuel (29.6%).
As for trends in gross gaming revenue (GGR), DraftKings has increased market share by more than 10% over the last five quarters, the company noted in its Q3 presentation. In the second quarter of 2022, DraftKings’ nationwide market share lingered near 20% for OSB and iGaming combined.
For the three-month period ended Sept. 30, DraftKings generated revenue of $789.5 million, beating analysts’ estimates of $702.3 million. It represents an increase of 57% from the same quarter in 2022. As DraftKings eyes full-year profitability in 2024, the company reported quarterly Adjusted EBITDA of negative-$153.4 million, up from negative-$264.2 in the same category in the year-ago quarter.
$DKNG | DraftKings:
– Raises FY23 Midpoint Revenue Guidance From $3.5B To $3.695B (Est. $3.53B)
– Introduces FY24 Revenue Midpoint Of $4.65B (Est. $4.29B)— Benzinga (@Benzinga) November 2, 2023
Moving forward, DraftKings is increasing the midpoint of its full-year 2023 Adjusted EBITDA guidance by about $100 million. The company now expects Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) this year between negative-$95 million and negative-$115 million. DraftKings offered full-year Adjusted EBITDA guidance on its earnings call in August in the range of negative-$190 million and negative-$220 million.
The quarterly results prompted Barry Jonas, an analyst with Truist Securities, to describe DraftKings as “one of the best, if not best” growth stories across the industry. Truist has strong convictions that DraftKings will emerge as a long-term winner in the space.
DraftKings CFO Jason Park cited efficient customer acquisition, strong customer retention, improved sportsbook hold, and promotional reinvestment as factors for the increased guidance. Promotional reinvestment as a percentage of GGR continues to improve, he added. Park was pleased with customer trends related to baseball, leading to the successful transition of a majority of the MLB customers at the start of the football season.
When it comes to prudent spending, one area in DraftKings’ income statement, a bucket dubbed “Sales and Marketing” expenses, has been closely scrutinized since the company went public. For the quarter, DraftKings reported expenses in the category of $313 million, down slightly from the $322 million spent in the year-ago quarter. It marked one of the first quarters that DraftKings has delivered a year-over-year decline in the category. Nevertheless, some investors remarked on social media Thursday night that the levels are still excessive for a company that has yet to deliver a full-year profit.
Robins promised to have more details on DraftKings’ push for profitability at the state level during the company’s Investor Day presentation on Nov. 14.
DraftKings rose more than 7% in Thursday’s after-hours session to $31 a share. DraftKings extended the gains on Friday morning, reaching a session high of $32.49, up nearly 14% from the previous day. The company is nearing its 52-week high of $34.49. DraftKings is still far below its all-time high of $73 a share, a level reached in March 2021.
DraftKings held the earnings call on Friday, the same day the company made its sports betting debut in Maine.
