With Wall Street analysts viewing DraftKings 1Q24 results positively and year-over-year revenue up 53% for the quarter, CEO and Co-founder Jason Robins was hard-pressed to attribute a single factor to the company’s success during Friday’s earnings call. Robins was asked if user acquisition, player retention or monetization trends were the biggest surprises and drivers for DraftKings’ positive results.
“At any point in time, there’s definitely something that you’re like, wow, that is just crushing what we expected,” Robins said. “But I will say the last few years, the last two years in particular, it’s been across the board. This last quarter and particularly in April, it’s been customer acquisition for sure, which I think was true for Q1.
“But I’ve also seen significant increases to LTV (loan-to-value) made over that period of time. Our player activity retention levels have been higher than ever. So, I think as we improve the product, and also as we just get more data and continue to do the analysis, continue to optimize, continue to build better tools that allow the teams to trade and also tools on the marketing side that allow the teams to get data to optimize the marketing better – the same thing with promos. We’re just at that stage, I think, with the industry and the company where there’s just so much that’s obvious that we can do and it’s just cranking through all of it, and it’s really moving metrics across the entire value chain. So, I can’t point to any one thing overall.”
DraftKings reported revenue of $1.175 billion for 1Q24, a 53% increase over the $770 generated during the same time period of 2023.
The quarter’s revenue increase was bolstered by the launch of sports betting in North Carolina and Vermont, in the same way the launch of sports betting in Ohio and Massachusetts boosted 1Q23’s revenue. But the addition of the new jurisdictions—which are less populous than Ohio and Massachusetts—is only part of the story.
“As the customer base matures, we’re seeing an increase in the ratio of existing customer volume to new customer volume, which is naturally bringing down the promo rate,” Robins said. “So, a lot, in fact the majority of it, is just the natural maturity of states and having a lower percentage of the population launching Q1 this year than last year.”
The increase in revenue would seem to open up more opportunities for DraftKings. But Robins says while not out of the question, the company is taking a measured, careful approach to mergers and acquisitions.
“I’ve been consistent in saying that we have a very high bar for M&A,” Robins said. “We understand there are a lot of ways we can deploy capital return value to shareholders, and going on an M&A spree is not something that we’re like, this is all we can do with our capital. I do think that M&A will be a lever for us, but we’re also practical about how much we do.”
Where DraftKings may invest capital is technology. Robins noted that because of the complexity of sports betting and igaming infrastructure, it’s incumbent on the company to continually invest in technology.
“I think first and foremost having a lot of scale and a very wide customer base gives us an advantage because we have more data and more data points to model and to improve personalization and make other decisions off,” Robins said. “We continue to invest, and being at scale gives us a much larger revenue base to invest in product and engineering. We continue to lean in there and I think that there’s a ton we can do to improve the product so that it will hopefully be revenue additive and certainly will be competitively differentiated.”
In a statement, J. P. Morgan analyst Joseph Greff wrote his firm’s “estimates go higher to reflect DKNG’s continued operating momentum—i.e., above-peer top-line growth related to stronger than peer product overall, increased parlay mix and structural hold in online sports betting, its growing scale position generating more efficient user acquisition and promotions, translating to increasing EBITDA flow-through and free cash flow generation. Overall, we think DraftKings’ 1Q24 upside and raised full-year 2024 guidance should be enough for the stock to grind higher, given recent and increased investor anxiety over low OSB hold during March Madness in 1Q24/2Q24 and how this (and regulatory risk) would impact—or impede—potential increased forward guidance.”
Truist Securities analyst Barry Jonas called DraftKings 1Q24 earnings “a bright spot in an otherwise dim Q1 earnings season so far. … We reiterate our Buy rating,” Jonas wrote.
