DraftKings Boosts 2023 Guidance, Stock Surges

DraftKings (NASDAQ: DKNG) sees a 7% after-hours surge as the company raises its 2023 guidance, predicting improved financial performance with a focus on customer efficiency.

In a strong after-hours move, shares of DraftKings (NASDAQ: DKNG) advanced by 7%. This uptick followed a 6.43% gain during regular trading hours and came on the heels of DraftKings once again revising its 2023 guidance.

As part of its third-quarter earnings report, the second-largest online sportsbook operator in the United States informed investors of its updated outlook for 2023. The company now anticipates a 2023 loss based on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $105 million, with expected revenue reaching $3.695 billion. These figures mark an improvement compared to previous projections, which had estimated an EBITDA loss of $205 million on sales of $3.5 billion.

DraftKings’ financial outlook for 2023 has seen significant enhancements over the year. Earlier in the year, the sportsbook operator raised the midpoint of its 2023 sales forecast to $3.185 billion from $2.95 billion. Additionally, the midpoint for expected earnings before interest, taxes, depreciation, and amortization (EBITDA) losses for the year was adjusted to $315 million, up from an earlier estimate of $400 million. These improved forecasts are attributed to enhanced operational efficiency.

Jason Park, Chief Financial Officer of DraftKings, stated, “DraftKings continues to acquire customers in an efficient manner, sustain customer engagement, improve its sportsbook structural hold and promotional reinvestment for Sportsbook and iGaming, and demonstrate fixed cost discipline.”

The launch of online sports wagering in Kentucky in September positively impacted DraftKings in the third quarter, with the potential for similar effects in Maine and North Carolina in the current quarter and into 2024.

DraftKings Excites with 2024 Projections

With the stock having surged by 154.43% year-to-date and concerns regarding valuation, DraftKings faces the challenge of delivering favorable future prospects. The company has unveiled promising 2024 guidance for both EBITDA and revenue.

DraftKings, headquartered in Boston, anticipates a positive 2024 EBITDA ranging from $350 million to $450 million, coupled with sales between $4.5 billion and $4.8 billion. This implies potential profitability on an EBITDA basis for much, if not all, of 2024, with the company poised to achieve record-breaking revenue.

Park added, “We are poised for a rapid increase in Adjusted EBITDA as we anticipate strong revenue growth coupled with a scaled fixed cost structure will continue. These trends provide for a long runway of margin improvement. Our fiscal year 2024 guidance at the midpoints of $4.65 billion in revenue and positive $400 million of Adjusted EBITDA implies incremental year-over-year revenue growth of almost $1 billion and an increase in Adjusted EBITDA of more than $500 million.”

DraftKings also expects to achieve positive EBITDA in the current quarter, amounting to $200 million.

Efficiency and Profitability: The DraftKings Approach

With increased scrutiny on the ability of online sportsbook operators to attract and retain customers without extravagant promotional expenditures, efficiency and profitability are pivotal for gaming companies.

DraftKings appears to be optimizing its operational efficiencies. The company reported an increase in the average monthly unique paying customers to 2.3 million during the third quarter. Notably, these customers are spending more money.

The operator stated, “Average Revenue per MUP (ARPMUP) was $114 in the third quarter of 2023, representing a 14% increase compared to the same period in 2022. This increase was primarily due to an increase in the Company’s structural sportsbook hold rate and improved promotional reinvestment for Sportsbook and iGaming.”

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