DraftKings Reports Positive Q1 Earnings

There was good news from the latest DraftKings quarterly earnings report. Thanks to impressive launches in popular sports betting jurisdictions Massachusetts and Ohio during Q1, DraftKings not only met revenue expectations, but surpassed them with an eye on possible profitability later this year. 

DraftKings released their Q1 earnings report late last week and they reflected a strong three-month period for one of America's top-two sports betting brands. The DraftKings Q1 earnings report, made available Friday, reflected an almost doubling of revenues, a dip in net loss, and a year-over-year increase in monthly unique players that signed up for their betting experience.

Customer acquisition has been credited in part with the better-than-expected numbers from DraftKings during the first quarter of 2023. An increased hold rate for the sportsbook also aided in the company’s numbers beating expectations through the first three months of 2023.

Overall, profitability may still be a few years away according to Jason Robins, DraftKings’ Chief Executive Officer, and Co-founder. But Q2, according to projections, could approach a break-even point, with possible positive earnings for the last quarter of the 2023 fiscal year.

DraftKings Q1 numbers

DraftKings is reporting $770 million in revenue for the first quarter of 2023, which comes in at a very positive 9.9% ahead of company expectations for the three-month period. The number also represents an 84.5% year-over-year increase for one of America's best sports betting apps.

Monthly subscribers to the DraftKings brand are up a whopping 39% year-over-year to 2.8 million users. 

Net losses for the company through Q1 of 2023 came in at $397 million, which is a 15% year-over-year drop from the same period last year.

“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 CEO Jason Robins. 

“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.”

Renewed revenue forecast

All of the good news from DraftKings' Q1 earning results has led analysts to up the forecast revenue totals for the online sports betting brand. Adjusted revenue forecasts are now an estimated $3.2 billion for 2023, which is 23% higher than the 2022 reporting period.

Previous revenue forecasts for the current fiscal year were significantly lower prior to the Q1 results coming out. DraftKings was originally expected to report revenues of about $3 billion in 2023. 

Adjusted EBITDA losses have also been amended after the company's strong Q1 report. What was once an estimated $350-$450 million in losses came in significantly lower at $290-$340 million thanks to the company's strong Q1 performance.

It all means that….

Stock prices for DraftKings grew a very respectable 12% during the first quarter of 2023 and finished with a share price of $24.58 US. The growth is likely a reaction to the fact that the company is closer to profitability than ever. Q2 should see the company approach a break-even point and Q4 should see actual positive earnings reports for the company.

DraftKings is still likely a few years away from bottom-line profitability, but quarterly reports like we just saw have created an optimism that the company will start making money sooner than had been expected.

So, expect the loss per share estimates to continue for DraftKings through next year, despite revenue estimates continuing to grow at a relatively fast pace. But with profitability just around the corner, the loss per share trend could become a thing of the past, sooner rather than later.