DraftKings Reports First Quarter Revenue of $770 Million; Raises 2023 Revenue Guidance Midpoint to $3.185 Billion and Improves 2023 Adjusted EBITDA Guidance Midpoint to ($315) Million
DraftKings announces Q1 2023 financial results and raises revenue guidance for FY2023
Positive
DraftKings reported an 84% increase in revenue for Q1 2023 compared to the same period last year, driven by customer acquisition and product innovation. The company expects to achieve breakeven on an Adjusted EBITDA basis in Q2 2023. DraftKings raised its revenue guidance for FY2023 to a range of $3.135 billion to $3.235 billion, representing a year-over-year growth of 40% to 44%. The company also improved its Adjusted EBITDA guidance for FY2023 to between ($290) million and ($340) million. DraftKings is live with mobile sports betting in 21 states and iGaming in 5 states, with plans to expand further.
05/04/2023 - 04:15 PM
Expects to be Approximately Breakeven on an Adjusted EBITDA Basis in the Second Quarter of 2023
BOSTON, May 04, 2023 (GLOBE NEWSWIRE) -- DraftKings Inc. (Nasdaq: DKNG) (“DraftKings” or the “Company”) today announced its first quarter 2023 financial results. The Company also posted a first quarter 2023 business update and an earnings presentation on the Investor Relations section of its website at investors.draftkings.com.
First Quarter 2023 Highlights
For the three months ended March 31, 2023, DraftKings reported revenue of $770 million , an increase of 84% compared to $417 million during the same period in 2022 driven primarily by efficient acquisition of new customers, product innovation driving higher hold percentage, decreased promotional intensity in more mature states, and continued healthy customer retention.
"DraftKings’ first quarter performance – 84% year-over-year revenue growth and share gains underpinned by a relentless focus on operational efficiency – demonstrates that this is a company positioned for sustained success,” said Jason Robins, DraftKings’ Chief Executive Officer and Co-founder. “We delivered highly successful online sportsbook launches in Ohio and our home state of Massachusetts and continued to create meaningful product differentiation driven by in-house innovations. We acquired customers faster and more efficiently and, importantly, saw healthy retention across cohorts. Looking at the remainder of 2023, I am confident DraftKings is well-positioned to achieve profitability on an Adjusted EBITDA basis in the near-term and deliver long-term value for our shareholders.”
“Strong execution across the organization is showing up in our results,” added Jason Park, DraftKings’ Chief Financial Officer. “Revenue grew at a healthy rate due to core drivers around customer acquisition, retention and monetization, including decreased promotional intensity and higher structural hold. In addition, our efficiency efforts produced clear results as demonstrated by significant year-over-year increases in gross margin and Adjusted EBITDA. Therefore, we are increasing the midpoint of our fiscal year 2023 revenue guidance to $3.185 billion from $2.95 billion and improving the midpoint of our fiscal year 2023 Adjusted EBITDA guidance to ($315) million from ($400) million .”
Continued Healthy Growth in Customer Retention, Acquisition, and Engagement
Monthly Unique Payers (“MUPs”) increased to 2.8 million average monthly unique paying customers in the first quarter of 2023, representing an increase of 39% compared to the first quarter of 2022. This increase reflects strong unique payer retention and acquisition across DraftKings’ Sportsbook and iGaming products as well as the expansion of its Sportsbook and iGaming products into new jurisdictions. Average Revenue per MUP (“ARPMUP”) was $92 in the first quarter of 2023, representing a 35% increase compared to the same period in 2022. This increase was primarily due to improvement in the Company’s structural sportsbook hold rate and reduced promotional intensity. Detailed financial data and other information for the first quarter of 2023 is available in the financial statements set forth below under the caption “Financial Results.” Raising 2023 Revenue Guidance and Improving 2023 Adjusted EBITDA Guidance
DraftKings is raising its fiscal year 2023 revenue guidance to a range of $3.135 billion to $3.235 billion from the range of $2.85 billion to $3.05 billion , which the Company previously announced on February 16, 2023. The Company’s updated 2023 revenue guidance range equates to year-over-year growth of 40% to 44% . DraftKings is also improving its fiscal year 2023 Adjusted EBITDA guidance. The Company now expects fiscal year 2023 Adjusted EBITDA of between ($290) million and ($340) million compared to its prior fiscal year 2023 Adjusted EBITDA guidance of between ($350) million and ($450) million , which the Company previously announced on February 16, 2023. The Company’s revenue and Adjusted EBITDA guidance for fiscal year 2023 includes all the existing jurisdictions in which it is live plus Puerto Rico, in which it expects to launch during the guided period. Expanded Mobile Sports Betting Footprint
DraftKings is live with mobile sports betting in 21 states that collectively represent approximately 44% of the U.S. population following the launch of its online Sportsbook product in Massachusetts on March 10, 2023. DraftKings is also live with iGaming in 5 states, representing approximately 11% of the U.S. population. DraftKings is live with its Sportsbook and iGaming products in Ontario, Canada, which represents approximately 40% of Canada’s population. Kentucky and Puerto Rico have authorized mobile sports betting and collectively represent approximately 2% of the U.S. population. DraftKings expects to launch its Sportsbook product in these jurisdictions pending licensure and regulatory approvals. In 2023, 12 states that collectively represent approximately 24% of the U.S. population have either introduced legislation to legalize mobile sports betting or introduced bills that may result in sports wagering referendums during an upcoming election. In addition, 5 states that collectively represent approximately 14% of the U.S. population have either introduced legislation to legalize iGaming or introduced a bill that may result in an iGaming referendum during an upcoming election. Webcast and Conference Call Details
As previously announced, DraftKings will host a conference call and audio webcast tomorrow, Friday, May 5, 2023, at 8:30 a.m. ET, during which management will discuss the Company’s results for the quarter and provide commentary on business performance. A question and answer session will follow the prepared remarks.
To listen to the audio webcast and live question and answer session, please visit DraftKings’ investor relations website at investors.draftkings.com. A live audio webcast of the earnings conference call will be available on the Company’s website at investors.draftkings.com, along with a copy of this press release, the Company’s Quarterly Report on Form 10-Q, a slide presentation and a first quarter 2023 business update. The audio webcast will be available on the Company’s investor relations website until 11:59 p.m. ET on June 30, 2023.
Financial Results
DraftKings’ first quarter 2023 financial results, as well as the financial results for the respective comparative period, are presented below:
DRAFTKINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2023 (Unaudited) December 31, 2022 Assets Current assets: Cash and cash equivalents $ 1,087,668 $ 1,309,172 Cash reserved for users 436,935 469,653 Receivables reserved for users 124,536 160,083 Accounts receivable 41,423 51,097 Prepaid expenses and other current assets 115,194 94,836 Total current assets 1,805,756 2,084,841 Property and equipment, net 62,273 60,102 Intangible assets, net 754,509 776,934 Goodwill 886,373 886,373 Operating lease right-of-use assets 60,804 65,957 Equity method investment 9,961 10,080 Deposits and other non-current assets 159,598 155,865 Total assets $ 3,739,274 $ 4,040,152 Liabilities and Stockholders’ equity Current liabilities: Accounts payable and accrued expenses $ 508,725 $ 517,587 Liabilities to users 670,456 686,173 Operating lease liabilities, current portion 3,975 4,253 Other current liabilities 48,733 38,444 Total current liabilities 1,231,889 1,246,457 Convertible notes, net of issuance costs 1,251,758 1,251,103 Non-current operating lease liabilities 66,466 69,332 Warrant liabilities 27,715 10,680 Long-term income tax liability 69,238 69,858 Other long-term liabilities 74,428 70,029 Total liabilities $ 2,721,494 $ 2,717,459 Commitments and contingent liabilities Stockholders' equity: Class A common stock, $0.0001 par value; 900,000 shares authorized as of March 31, 2023 and December 31, 2022; 471,723 and 459,265 shares issued and 461,634 and 450,575 outstanding as of March 31, 2023 and December 31, 2022, respectively $ 46 $ 45 Class B common stock, $0.0001 par value; 900,000 shares authorized as of March 31, 2023 and December 31, 2022; 393,014 shares issued and outstanding as of March 31, 2023 and December 31, 2022 39 39 Treasury stock, at cost; 10,089 and 8,690 shares as of March 31, 2023 and December 31, 2022, respectively (359,491) (332,133) Additional paid-in capital 6,869,647 6,750,055 Accumulated deficit (5,528,949) (5,131,801) Accumulated other comprehensive income 36,488 36,488 Total stockholders’ equity $ 1,017,780 $ 1,322,693 Total liabilities and stockholders’ equity $ 3,739,274 $ 4,040,152
DRAFTKINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 2023 2022 Revenue $ 769,652 $ 417,205 Cost of revenue 521,740 313,379 Sales and marketing 389,133 321,452 Product and technology 88,088 81,352 General and administrative 160,476 216,606 Loss from operations (389,785 ) (515,584 ) Other income (expense): Interest income 11,795 801 Interest expense (655) (653) (Loss) gain on remeasurement of warrant liabilities (17,035) 12,681 Other income, net 19 37,882 Loss before income tax provision and loss from equity method investment (395,661 ) (464,873 ) Income tax provision 1,368 469 Loss from equity method investment 119 2,351 Net loss attributable to common stockholders $ (397,148 ) $ (467,693 ) Loss per share attributable to common stockholders: Basic and diluted $ (0.87) $ (1.14)
DRAFTKINGS INC. NON-GAAP FINANCIAL MEASURES
Three months ended March 31, 2023 2022 Adjusted EBITDA $ (221,611) $ (289,509) Adjusted Loss Per Share $ (0.51) $ (0.74)
DRAFTKINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2023 2022 Operating Activities: Net loss $ (397,148) $ (467,693) Adjustments to reconcile net loss to net cash flows used in operating activities: Depreciation and amortization 48,213 32,225 Non-cash interest expense 157 654 Stock-based compensation expense 117,400 187,077 Loss from equity method investment 119 2,351 Loss (gain) on remeasurement of warrant liabilities 17,035 (12,681) Loss (gain) on marketable equity securities and other financial assets 136 (37,433) Deferred income taxes 2,254 256 Other expenses, net (2,726) (768) Change in operating assets and liabilities: Receivables reserved for users 35,547 (3,997) Accounts receivable 9,674 (2,347) Prepaid expenses and other current assets (10,069) (30,887) Deposits and other non-current assets (3,464) (493) Operating leases, net 1,864 (125) Accounts payable and accrued expenses (6,292) (16,087) Liabilities to users (15,717) (8,099) Long-term income tax liability (620) (178) Other long-term liabilities 2,145 1,507 Net cash flows used in operating activities $ (201,492 ) $ (356,718 ) Investing Activities: Purchases of property and equipment (7,094) (8,614) Cash paid for internally developed software costs (19,419) (13,195) Acquisition of gaming licenses (1,362) (267) Other investing activities, net 311 (989) Net cash flows used in investing activities $ (27,564 ) $ (23,065 ) Financing Activities: Purchase of treasury stock (27,358) (14,083) Proceeds from exercise of stock options 2,192 1,770 Net cash flows used in financing activities $ (25,166 ) $ (12,313 ) Net decrease in cash and cash equivalents and restricted cash (254,222) (392,096) Cash and cash equivalents and restricted cash at the beginning of period 1,778,825 2,629,842 Cash and cash equivalents and restricted cash, end of period $ 1,524,603 $ 2,237,746 Disclosure of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 1,087,668 $ 1,772,892 Cash reserved for users 436,935 464,854 Total cash, cash equivalents and restricted cash, end of period $ 1,524,603 $ 2,237,746 Supplemental Disclosure of Noncash Investing and Financing Activities: Investing activities included in changes in accounts payable and accrued expenses $ (679) $ 7,604 Supplemental Disclosure of Cash Activities: Decrease in cash reserved for users $ (32,718) $ (12,096) Cash paid for interest — —
Non-GAAP Financial Measures
This press release includes Adjusted EBITDA and Adjusted Earnings Per Share, which are non-GAAP financial measures that DraftKings uses to supplement its results presented in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company believes Adjusted EBITDA and Adjusted Earnings Per Share are useful in evaluating its operating performance, similar to measures reported by its publicly-listed U.S. competitors, and regularly used by security analysts, institutional investors and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA and Adjusted Earnings Per Share are not intended to be substitutes for any GAAP financial measures, and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.
DraftKings defines and calculates Adjusted EBITDA as net loss before the impact of interest income or expense (net), income tax provision or benefit, and depreciation and amortization, and further adjusted for the following items: stock-based compensation; transaction-related costs; litigation, settlement and related costs; advocacy and other related legal expenses; gain or loss on remeasurement of warrant liabilities; and other non-recurring and non-operating costs or income, as described in the reconciliation below.
DraftKings defines and calculates Adjusted Earnings Per Share as basic and diluted loss per share attributable to common stockholders before the impact of amortization of acquired intangible assets; stock-based compensation; transaction-related costs; litigation, settlement and related costs; advocacy and other related legal expenses; gain or loss on remeasurement of warrant liabilities; and other non-recurring and non-operating costs or income, as described in the reconciliation below.
DraftKings includes these non-GAAP financial measures because they are used by management to evaluate the Company’s core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. Adjusted EBITDA and Adjusted Earnings Per Share exclude certain expenses that are required in accordance with GAAP because they are non-recurring items (for example, in the case of transaction-related costs and advocacy and other related legal expenses), non-cash expenditures (for example, in the case of amortization of acquired intangible assets, depreciation and amortization, remeasurement of warrant liabilities and stock-based compensation), or non-operating items which are not related to the Company’s underlying business performance (for example, in the case of interest income and expense and litigation, settlement and related costs).
The unaudited table below presents the Company’s Adjusted EBITDA reconciled to its net loss, which is the most directly comparable financial measure calculated in accordance with GAAP, for the periods indicated:
Three months ended March 31, (amounts in thousands) 2023 2022 Net loss $ (397,148) $ (467,693) Adjusted for: Depreciation and amortization (1) 48,213 32,225 Interest income, net (11,140) (148) Income tax provision 1,368 469 Stock-based compensation (2) 117,400 187,077 Transaction-related costs (3) — 3,774 Litigation, settlement, and related costs (4) 2,563 1,950 Advocacy and other related legal expenses (5) — — Loss (gain) on remeasurement of warrant liabilities 17,035 (12,681) Other non-recurring costs and non-operating (income) costs (6) 98 (34,482) Adjusted EBITDA $ (221,611 ) $ (289,509 )
(1) The amounts include the amortization of acquired intangible assets of $29.8 million and $19.2 million for the three months ended March 31, 2023 and 2022, respectively.
The unaudited table below presents the Company’s Adjusted Earnings Per Share reconciled to its basic and diluted loss per share attributable to common stockholders, which is the most directly comparable financial measure calculated in accordance with GAAP, for the periods indicated:
Three months ended March 31, 2023 2022 Basic and diluted loss per share attributable to common stockholders $ (0.87) $ (1.14) Adjusted for: Stock-based compensation (1) 0.26 0.46 Amortization of acquired intangible assets 0.07 0.05 Transaction-related costs (2) — 0.01 Litigation, settlement, and related costs (3) 0.01 0.01 Loss (gain) on remeasurement of warrant liabilities 0.04 (0.03) Advocacy and other related legal expenses (4) — — Other non-recurring costs and non-operating (income) costs (5) — (0.09) Adjusted Loss Per Share* $ (0.51 ) $ (0.74 )
* Weighted average number of shares used to calculate Adjusted Earnings Per Share for the first quarter of 2023 was 455.1 million; totals may not sum due to rounding.
About DraftKings
DraftKings Inc. is a digital sports entertainment and gaming company created to fuel the competitive spirit of sports fans with products that range across daily fantasy, regulated gaming and digital media. Headquartered in Boston, and launched in 2012 by Jason Robins, Matt Kalish and Paul Liberman, DraftKings is the only U.S.-based vertically integrated sports betting operator. DraftKings’ mission is to make life more exciting by responsibly creating the world’s favorite real-money games and betting experiences. DraftKings Sportsbook is live with mobile and/or retail sports betting operations pursuant to regulations in 23 states and in Ontario, Canada. The Company operates iGaming pursuant to regulations in 5 states and in Ontario, Canada under its DraftKings brand and pursuant to regulations in 3 states under its Golden Nugget Online Gaming brand. DraftKings’ daily fantasy sports product is available in 44 states, certain Canadian provinces and the United Kingdom. DraftKings is both an official daily fantasy and sports betting partner of the NFL, NHL, PGA TOUR and UFC, as well as an official daily fantasy partner of NASCAR, an official sports betting partner of the NBA and an authorized gaming operator of MLB. Launched in 2021, DraftKings Marketplace is a digital collectibles ecosystem designed for mainstream accessibility that offers curated NFT drops and supports secondary-market transactions. In addition, DraftKings owns and operates Vegas Sports Information Network (VSiN), a multi-platform broadcast and content company. DraftKings is committed to being a responsible steward of this new era in real-money gaming with a Company-wide focus on responsible gaming and corporate social responsibility.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including statements about the Company and its industry that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this press release, including statements regarding guidance, DraftKings’ future results of operations or financial condition, strategic plans and focus, user growth and engagement, product initiatives, and the objectives and expectations of management for future operations (including launches in new jurisdictions and the expected timing thereof), are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “confident,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “going to,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “propose,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. DraftKings cautions you that the foregoing may not include all of the forward-looking statements made in this press release.
You should not rely on forward-looking statements as predictions of future events. DraftKings has based the forward-looking statements contained in this press release primarily on its current expectations and projections about future events and trends, including the current macroeconomic environment, that it believes may affect its business, financial condition, results of operations, and prospects. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside DraftKings’ control and that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include, but are not limited to, DraftKings’ ability to manage growth; DraftKings’ ability to execute its business plan and meet its projections; potential litigation involving DraftKings; changes in applicable laws or regulations, particularly with respect to gaming; general economic and market conditions impacting demand for DraftKings’ products and services; economic and market conditions in the media, entertainment, gaming, and software industries in the markets in which DraftKings operates; market and global conditions and economic factors, including the potential adverse effects of the global coronavirus pandemic (or the emergence of additional variants or strains thereof), as well as the potential impact of general economic conditions, including inflation, rising interest rates and instability in the banking system, on DraftKings’ liquidity, operations and personnel, as well as the risks, uncertainties, and other factors described in “Risk Factors” in DraftKings’ filings with the Securities and Exchange Commission (the “SEC”), which are available on the SEC’s website at www.sec.gov. Additional information will be made available in other filings that DraftKings makes from time to time with the SEC. The forward-looking statements contained herein are based on management’s current expectations and beliefs and speak only as of the date hereof, and DraftKings makes no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations, except as required by law.
Contacts
Media:
Media@draftkings.com
@DraftKingsNews
Investors:
Investors@draftkings.com
DraftKings reported an 84% increase in revenue for Q1 2023 compared to the same period last year.
DraftKings raised its revenue guidance for FY2023 to a range of $3.135 billion to $3.235 billion.
DraftKings improved its Adjusted EBITDA guidance for FY2023 to between ($290) million and ($340) million.
DraftKings is live with mobile sports betting in 21 states.
DraftKings is live with iGaming in 5 states.
