Key points:
- DraftKings expects to reach several 2026 milestones a year early
- Next year, adjusted EBITDA could quadruple while revenue increases 30%
- The operator is in a transformative stage with customer acquisitions
After DraftKings reported a Q3 revenue rose of 39% to $1.1bn, despite its net loss growing, Jason Robins, CEO, and Alan Ellingson, CFO, went through the latest figures before addressing shareholders and their questions.
Sportsbook performance
This is an interesting time of year for sportsbook operators, with so many American leagues starting up or gaining traction towards major games in the new year. “Our sportsbook product continues to improve,” DraftKings opened with, “which positions us well with the NBA markets.”
With regards to some of the most recent figures, DraftKings also reminded shareholders that “the shorter the period, the more volatility can affect things,” especially when speculating on potential Q4 results. Despite this, the executives also stated that “it was actually nice to have a neutral quarter, especially with NFL starting,” that “hold was as expected” and “in Q3, we performed as expected.”
But, on the topic of looking forward, DraftKings also stated that it expects revenue to grow by 30% next year, whether its adjusted EBITDA doubles or quadruples .
"We’re already a year ahead of where we thought we’d be”
As DraftKings explained it, there were a number of “customer-friendly” results recently, which shareholders were particularly curious about. “We have seen a little bit of evidence that handle can go up and down depending on whether players are winning or not.” DraftKings went on to explain that, “on the margins, we see some incremental betting but players tend to exhibit the same betting behaviour whether they’re winning or losing.”
Sports hasn’t been the only thing customers have been flocking to place bets on, either. When asked what the main market was in the non-sports betting section, the answer was clear: “Election markets.” DraftKings went on to explain that these are difficult, because “it’s not licensed as a betting market, it’s licensed as a financial market, but we’re definitely looking at it ahead of the next election, that’s for sure.”
Customer acquisition
The other main topic shareholders wanted to discuss was the customer acquisition strategies DraftKings has been utlising recently. This focus likely came from the fact that Missouri has just voted to approve sports betting legislation, which DraftKings confirmed it was interested in entering once it was live. Missouri accounts for 2% of the US population, which could tip DraftKings over the all-important halfway milestone, as it is currently live in 25 states, which represent 49% of the US population.
“Florida is a very big state and we’d obviously be excited if we could offer our products there, but it’s not up to us”
During the call, DraftKings said “50% is around the right number for flow through”, but “40% would be a more cautious number.” As the operator “doesn’t want to underestimate customer acquisition,” it’s managing its various campaigns closely as the sports calendar begins to fill up.
“On the promotional side, we’ve been cautious with the customer acquisition environment being so hot,” DraftKings explained. “It’s more about natural growth on our side with a little bit of structural hold improvement.”
Of course, acquiring customers is one thing, but it’s another feat entirely to retain them and keep them as a paying customer. “It’s still early, but I still think customers we’ve been acquiring recently are of the similar quality as to those we’ve received so far.” After the first year or two there’s an idea that customer acquisition slows down, or that the customers acquired later on won’t be of the same quality. But DraftKings seems confident customers who have been onboarded recently aren’t simply going to turn around and leave at the first opportunity. “There’s only a month or two worth of data and we’ll keep an eye on it with the NBA and other leagues.”
“On the promotional side, we’ve been cautious with the customer acquisition environment being so hot"
DraftKings has been open that it’s “seeing a shift towards a more mature customer base”, but it’s not sweating on how to retain customers as they come and go throughout the year. The executives explained that customer acquisition is a two-factor process, depending on the customer. If a player is simply slowing down, then this is “natural attrition that can be remedied by CRM and tailored offers”, while the other kind of customer will only return for big events because they only bet perhaps once or twice a year. Overall, DraftKings was confident that it was handling its different types of customers well.
What to expect in 2025
DraftKings has a few different tricks up its sleeve by now, including Jackpocket and a recent foray into micromarkets. However, it was clear with its intentions: “We’re only going to commit to something we’re confident in.”
After all, DraftKings doesn’t need to rush or try and make up for a lapse in figures. “We’re going to be where we thought we’d be in 2025 or 2026. We’re already a year ahead of where we thought we’d be.”
DraftKings is focused on the aspects of business it knows can work positively for the company, such as Missouri and the NBA, while the non-sports events and other states are on a need-to-deal-with basis. When asked about Florida, the execs replied: “Florida is a very big state and we’d obviously be excited if we could offer our products there, but it’s not up to us!”
