DraftKings stock surges after execs promise efficiency

February 20, 2023 8:00 PM

DraftKings stock surges after execs promise efficiency

Photo: Shutterstock
  • Matthew Crowley, CDC Gaming Reports
February 20, 2023 8:00 PM
  • Matthew Crowley, CDC Gaming Reports
  • United States
  • Sports Betting

When DraftKings officials said “efficient” during Friday’s fourth-quarter earnings call, investors must have heard “excellent.” After the sports betting company said it would scale back deals with pro sports leagues to operate more leanly, its stock surged 15%, making it one of the day’s top market movers.

DraftKings also said it narrowed its quarterly loss and posted higher, record revenue. Earnings per share and revenue both topped Wall Street forecasts.

Boston-based DraftKings CEO Jason Robins said “a number of partners” had agreed to cut fees for media rights and that his company hadn’t renewed some media rights deals. (Robins added that some deals had been ended over the past year.)

“I think that there’s been a real light bulb that’s gone off here that we can do more and actually grow revenue faster if we become more efficient,” Robins said in a conference call with analysts and journalists. “And there’s a connection between being better focused on expense management and efficiency with revenue growth, with doing better for the customer.”

In a statement, DraftKings said its net loss was $242.7 million, or 53 cents per share, for the three months ended Dec. 31, compared with a net loss of $326.3 million, or 80 cents per share, a year earlier. The latest earnings per share result topped the 58 cent loss consensus forecast of analysts surveyed by Seeking Alpha.

DraftKings shares rose $2.73 on the news to close at $20.54 on the Nasdaq Stock Market.

Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that excludes one-time costs, narrowed to a $49.9 million loss from a year-earlier $128 million loss.

Fourth-quarter revenue rose 80.7% to $855.1 million from $473.3 million, topping the $799.25 million forecast of Seeking Alpha-polled analysts.

DraftKings raised its fiscal year 2023 revenue guidance to a range of $2.85 billion to $3.05 billion from a range of $2.8 billion to $3 billion that the company had forecast in November.

In the fourth quarter, DraftKings had 2.6 million average monthly unique paying customers, up 31% from a year earlier. Average revenue per monthly unique payers was $109 in the fourth quarter, up 42% from a year earlier, buoyed by an improved structural sportsbook hold rate.

“We are seeing great customer retention, handle for retained players is growing, promotional reinvestment is coming down and hold percentage is going up,” DraftKings Chief Financial Officer Jason Park said during the conference call. “And because much of the net revenue growth is coming from less promotions and higher hold, our adjusted gross margin rate in that vintage was up more than 400 basis points in 2022 versus 2021.”

DraftKings continued to expand its reach — with fourth-quarter launches in Kansas and Maryland and a New Year’s Day launch in Ohio. The company said it identified $100 million of cost savings for 2023, about $50 million from scale marketing efficiencies and another $50 million from people-related costs.

DraftKings results and guidance buoyed some analysts. In an investors note highlighted by MarketWatch, Oppenheimer analysts wrote, “We like the setup into ’23 on product improvements generating higher yields and a clear state launch road map providing opportunity to exhibit advertising leverage in vintage states.”

For the full year ended Dec. 31, DraftKings had a net loss of $1.3 billion, or $3.16 per share, compared with a net loss of $1.5 billion, or $3.78 per share, a year earlier. Twelve-month revenue rose 69% to $2.2 billion from $1.3 billion.

Follow Matthew Crowley on Twitter @copyjockey.