At DraftKings‘ first-quarter earnings call, CEO Jason Robins revealed that the sportsbook will launch a cash-out feature for same game parlays later this year.
Robins called the upcoming feature “a critical addition to our offering.”
DraftKings said the increase in its structural sportsbook hold, which the company expects to hit 10.5% in 2024, is primarily down to its same game parlay offering. Given that hold accounts for an extra $20 million in revenue and $14 million in adjusted EBITDA, it’s no surprise that one of the company’s focuses is on continuing to improve that offering.
The update came on the heels of DraftKings’ announcement that it exceeded its expectations in the first quarter of 2024.
Revenue for the three months ending March 31 grew 53% year-over-year to $1.18 billion, $405 million above the $769.7 million recorded in Q1 2023. Adjusted EBITDA was $22.4 million, down from $151 million in Q4 but a big swing from a $221.6 million loss in Q1 last year.
Robins called the quarter’s performance “outstanding.”
Customer acquisition, new launches fuel growth
The CEO cited numerous factors in the positive results, including encouraging customer engagement results.
Average monthly unique players rose 23% year-over-year to 3.4 million, which Robins said was largely down to strong player acquisition and retention across both its sportsbook and online casino vertical. Players are spending more too. The company recorded an average player spend of $114, up 25%.
Robins told investors that DraftKings has seen more success in funneling sports bettors to its online casino than it has bringing iGaming players to its sportsbook. “Of course, we are cross-selling between all of our products but we find the much more effective funnel is to acquire them on sports and cross-sell them to iGaming.”
Another contributor was the company’s launches in Vermont and North Carolina. Those expansions mean that DraftKings’ sports betting operations span 25 states, collectively comprising 49% of the U.S. population, and its iGaming is present in five states. Both channels are also operating in Ontario, exposing the company to 40% of the Canadian population.
Launches cost money. DraftKings noted that revenue costs were up 36.1% and general and administrative costs rose 8.6%. While DraftKings is still operating at a loss, that Q1 figure of $138.8 million is significantly lower than the $389.8 million last year.
On the topic of state launches, DraftKings reported that their promotional spending was down 7% year-over-year despite the expansion. That was a reasonable expectation given that it spent such a sizeable sum in Q1 2023 when launching in Ohio and Massachusetts.
DraftKings increases full-year revenue guidance
As a result of DraftKings posting strong gains that outperformed expectations, the company has revised its forecast for the rest of the year.
DraftKings has raised the midpoint of its revenue guidance to $4.9 billion from $4.775 billion, which would represent year-on-year growth of 33.5%. The Adjusted EBITDA midpoint guidance has been increased to $500 million from $460 million.
Alan Ellingson, who officially replaced new Chief Transformation Officer Jason Park as the company’s CFO at the start of May, told investors that the decision was made “as a result of our excellent first quarter results and improved outlook on customer acquisition and engagement for the rest of 2024.”
These estimates are based on activities in existing jurisdictions. Robins told investors he is confident of further expansion in 2024.
Jackpocket acquisition to fuel further growth
Those projections also do not account for the impacts of the company’s acquisition of Jackpocket.
DraftKings said it expects to add an additional $340 million per year in gross revenue thanks to its acquisition of the lottery app, which it agreed to purchase in February for $750 million. The company says this will be incorporated into its full-year guidance when the deal closes.
Robins added that he sees Jackpocket as being an effective and efficient funnel to acquire players through lottery gaming and cross-sell them to the sportsbook or online casino products.
Meanwhile, Robins said that the company’s main focus for potential expansion in 2025 will be how gaming legislation may develop in Texas. “Texas, I think, has a real shot,” he said, noting that the Lone Star State‘s legislature doesn’t meet in 2024. Robins also said he expects to see some momentum gather in online gaming in other states.
One thing that Robins was not so open about was the report that DraftKings may be an interested buyer if Rush Street Interactive does decide to sell. While not directly addressing the rumors, he suggested that trying to strike two major deals simultaneously could be a “distraction” for the company’s organic growth.
