The DraftKings Q3 earnings call commenced with a victory lap as CEO and Co-Founder Jason Robins celebrated the company’s status as the overall online gaming leader in the US. A recent Eilers and Krejcik report noted the shift and that DraftKings was now generating more gross gaming revenue than everyone else.
DraftKings new overall market leader for online gambling
Revenues for the quarter outpaced projections at $790 million, an uptick of 57% year over year. Adjusted EBITDA losses for the quarter amounted to $153 milllion compared to $263 million last year.
“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 Robins. “Our new and differentiated features and functionality have created an exceptional user experience that sustains engagement for our mobile sports betting and iGaming customers.”
The overall GGR lead is certainly worth celebrating, but by looking at handle instead of hold, it is unclear how much DraftKings is spending to extend its lead in states like Massachusetts and Ohio.
Robins did say external marketing from the company is on the decline with several more mature markets continuing to drop. He added that the company is expecting external marketing to decline in 2024 as well given the lower likelihood that a big state will regulate sports betting.
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The company currently holds at around roughly 9.5%, which puts it ahead of most other competitors. There have been conversations around whether high hold products like same game parlays might be jeopardizing the lifetime value of a customer.
“Retention is the most important variable,” Robins said, but he also offered some insight into the company’s approach to finding that balance.
“I think [hold] is something we’re always going to be anayzing and optimizing. It’s almost a tricky question…because it really depends on where you create the hold increase from. If you continue to create products that the customer wants and they have demand that have higher hold, that can do a great job of continuing to raise your hold.”
Robins also teased the introduction of a new product at the company’s Nov. 14 investor day that fits the dual objective of appealing to customers and increasing hold.
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The topic of competing fantasy products like PrizePicks and Underdog Fantasy inevitably came up, as sportsbook operators have been pressuring regulators to revisit their fantasy sports regulations. Robins said, however, that none of the company’s financial forecasting considers a potential uptick if these operators are removed from more states.
“I definitely think that cracking down on the illegal market is a good thing for us,” Robins said of the recent regulatory assault on pick’em fantasy contests. “We haven’t really thought about any direct impacts on the business. It’s not something we contemplate in our guidance. Depending on the situation, there could be potential for some of that revenue that’s leaked into the illegal market to come back into the legal market. If that happens, we certainly hope that we get our fair share of it.
