US sports betting giant DraftKings has reported a third-quarter revenue increase of 136% to $502, outperforming the previously provided estimates for the period. As a consequence, the company has now raised its full-year revenue and Adjusted EBITDA guidance. However, its shares plunged the most in the company’s trading history on Friday, as the firm said its user growth slowed in the third quarter.
Breaking down by segment shows the company’s B2C operations grew to $493 million, an increase of 161% compared to the three months ended September 30 last year. DraftKings attributes this to “robust customer acquisition and retention;” launches of its sportsbook and iGaming products in additional jurisdictions; and “atypically high hold rates” largely from NFL wagering; and reduced promotional intensity.
“DraftKings had a very strong third quarter. Our team continued to drive top-line growth through highly effective customer engagement and compelling product and technology enhancements while remaining focused on our path to profitability,” said Jason Robins, DraftKings’ co-founder, CEO and Chairman of the Board.
For the ongoing NFL season, the company made investments in its mobile sportsbook product, which Robins said created “a differentiated and fun customer experience,” also realizing unique marketing optimization benefits “as an operator with truly national scale.”
During the quarter, Robins told investors the company shifted “more attention” towards cost control and path to profitability. “We identified over $100 million of annual cost savings and have significantly slowed year-over-year fixed cost growth as evidenced by our Q3 results,” he said, as reported by Boston Business Journal.
“What I’m most proud of though, is that we’ve been able to do all of this while continuing to focus heavily on top line growth, winning competitively and most importantly on retaining and growing engagement with our customers.” Robins also added the firm continues to be “confident” that it will achieve positive Adjusted EBITDA in Q4 2023.
“Our results in the third quarter significantly exceeded the expectations that we provided on our second-quarter earnings conference call,” added Jason Park, DraftKings’ CFO. The company is increasing the midpoint of its fiscal year 2022 revenue guidance by $45 million and improving the midpoint of its Adjusted EBITDA guidance by $10 million.
DraftKings now expects revenue in the range of $2.16 billion to $2.19 billion, up from the range of $2.08 billion to $2.18 billion previously provided. The business is also raising its 2022 Adjusted EBITDA guidance, expecting a loss between $800 million and $780 million, less than the previously expected loss between $835 million and $765 million.
In addition to the revenue hike, Q3 also saw a boost in Monthly Unique Payers (MUPs), which increased to 1.6 million average monthly unique paying B2C customers, an increase of 22% compared to the same period last year.
“This increase reflects strong unique retention and acquisition across DraftKings’ sportsbook and iGaming products as well as the expansion of its sportsbook and iGaming products into new jurisdictions, partially offset by a decline in Daily Fantasy Sports MUPs,” said the company.
However, DraftKings plunged the most in its trading history on Friday. While the number of monthly unique paying customers saw a significant increase, analysts had projected 2 million customers for Q3. Compared to the prior quarters, the 22% growth was down from 30% in Q2 and 29% in Q1.
DraftKings concluded the quarter with mobile sports betting live in 18 states, collectively representing approximately 37% of the US population after its launch in Kansas in September. The company is also live with iGaming in 5 states, representing approximately 11% of the U.S. population. DraftKings launched its products for both segments in Ontario on May 18.
Next up, DraftKings expects to launch mobile sports betting in Maryland in Q4; in Ohio and Massachusetts in Q1 of 2023; and in Puerto Rico in Q3 of 2023. The launches, included in the company’s revenue guidance, would bring the company’s penetration of the U.S. population to 45%.
