DraftKings Q3 2023 Report In, Losses Down and Shares Up
DraftKings, one of the two leading U.S. sports betting operators, recently released its Q3 2023 financial report.
Although the company is not yet profitable overall, net losses were down 37% on Q3 2022 and the revenues were up 57% in that same period.
Despite still making a loss, DraftKings stock rose 9% in after-hours trading following the release of the earnings report, which surpassed many investor expectations.
“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 organization,” said DraftKings CEO Jason Robins in a press release accompanying the earnings report.
Revenue Forecast Upgraded
In the quarter ending in September, DraftKings announced revenue of $790 million, which exceeded the anticipated consensus of $686 million. However, that translated into an overall loss of $283 million, after paying out some $300 million in marketing costs, as well as taxes and other expenditures.
The reported losses per share were $0.6, which was better than the expected $0.7.
Considering these results, DraftKings has upgraded its full-year revenue forecast, now estimating it to be between $3.67 billion and $3.72 billion, a rise from the previous projection of $3.46 billion to $3.54 billion. Additionally, the company has set a 2024 full-year revenue guidance at $4.5 billion, a slight decrease from the earlier $4.8 billion forecast, and reaffirmed its goal to achieve adjusted earnings positivity in 2024 for the first time since its inception in 2012.
The Massachusetts-based operator has had a strong national performance this year. According to some researchers, it has overtaken its long-time competitor FanDuel as the largest online gambling operator in the United States in terms of combined sportsbook and online casino revenue. Either way, the race is very close – as demonstrated by their neck-and-neck performances in the New York sports betting market, which is the largest in the U.S., with regular billion-dollar handle months.
Stock Increases, Marketing Costs Down Slightly
Before the earnings report, DraftKings’ stock had already increased by 149% over the year.
A critical factor in the ongoing path to profitability for DraftKings has been the scrutiny of its marketing costs.
The company’s sales and marketing expenses saw a 2.6% decline to $313.3 million, down from $321.7 million in the same quarter of the previous year. This reduction represents the first year-over-year drop in marketing spend in at least 12 quarters, a significant change from the usual quarterly increases of 40% or more seen in 2021 and 2022.
However, they are still the biggest marketing spenders of all gambling operators nationally.
User Base Soars, Revenue Per Customer Also Up
Another key metric for DraftKings is its user base, which has shown growth to 2.3 million average monthly users, up from 1.6 million in the third quarter of the previous year and 1.3 million in the third quarter of 2021.
This reflects the company’s continued expansion into new U.S. markets in 2023, including its recent entry into the newly-opened Kentucky sports betting market. Last week, it was also one of just two operators, alongside Caesars, to start offering Maine sports betting.
As well as an expanding customer base, 2023 has also seen DraftKings’ revenue per user increase to $114. That’s a 14% rise from the previous year’s third quarter figure of $100. and an 83% increase from the same period in 2021 ($47).
The expansion and maturation of the sports betting and online casino market across the U.S. are essential contexts for interpreting DraftKings’ quarterly and annual figures. Nearly 50% of the U.S. population now lives in states with regulated sports betting, and about 13% are in states with legal online casinos.
“It’s really hard to say how much of it is new players coming into the market and us disproportionately acquiring those players relative to competition and then retaining those players, versus truly stealing players from competitors, we don’t really know,” Robins said on Friday, speaking in the company earnings call.
DraftKings is set to hold its 2023 Investor Day on November 14, where further details and insights into the company’s performance and strategies are expected to be shared.