DraftKings Defies Expectations with First Quarter Profit, Raises 2024 Revenue Forecast

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On a recent Thursday, DraftKings (NASDAQ: DKNG) announced a triumphant first quarter, boasting an unexpected profit in their earnings per share (EPS) and, once again, raising their 2024 revenue forecast. The sportsbook operator’s financial victory was largely found in the numbers – earning three cents per share on sales of $1.18 billion in the first quarter, defying expectations of an 11-cent per share loss on a $1.174 billion revenue. This positive turn of events was not wholly unpredictable, as DraftKings’ financial updates have consistently offered promising prospects.

Riding this wave of success, DraftKings has hiked up their yearly revenue guidance – shifting the midpoint from $4.775 billion to $4.9 billion. This adjustment was a notch above the estimated consensus of $4.82 billion. Reasons behind this encouraging tilt comprised of a favorable start to the year and an anticipated rise in customer acquisitions and engagement occurring in the latter part of the year. Concurrently, their midpoint forecast for earnings before interest, taxes, depreciation, and amortization (EBITDA) has also shot up from $460 million to $500 million.

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The new CFO, Alan Ellingson, contributes the forecasted EBITDA flow-through margin, which could surpass 50% for this year, to anticipated gross margin improvements and profitable cost control tactics. Though a slight dip was reported in DraftKings’ cash and cash equivalents – slipping from $1.27 billion at 2023’s end to $1.19 billion at the first quarter of 2024, their total liabilities saw a pleasing decrease – dropping from $3.1 billion to $2.96 billion.

DraftKings has also managed to reel in a larger clientele, offering services across both iGaming and sports wagering. During the first quarter alone, the influx of Monthly Unique Players (MUPs) increased by 3.4 million, marking a solid 23% annual increase. Cashing in on this growth, the Average Revenue per Monthly Unique Player (ARPMUP) for the first quarter reached $114 – a significant 25% lift from the same period in the prior year. This upturn is accredited to a raise in DraftKings’ sportsbook hold percentage along with enhanced promotional reinvestment for Sportsbook and iGaming.

Impressively, DraftKings’ stock, leveraged by these gains, has observed an upward climb of 22% since the beginning of the year, a striking jump of 95.32% from the prior year. DraftKings is steadily establishing a wider online sports wagering market share in larger states such as Michigan and Pennsylvania, reflecting favorably on the brand’s burgeoning value and consumer preference for their mobile app due to the company’s technological investments.

Unveiling their regional perspective for 2024, it seems unlikely that any significant states will introduce iGaming or online sports betting. Nevertheless, DraftKings has reported that 11 states have introduced sports betting bills since the start of the year, with an additional five considering internet casino legislation. As for new regional launches, DraftKings is set to make its debut appearance in Puerto Rico this year.

DraftKings extended its reach to North Carolina on March 11, 2024, with its Sportsbook product now available in 25 states collectively representing around 49% of the U.S. population. Alongside sports betting, the company also offers iGaming services in five states and sports wagering in Ontario, Canada.