DraftKings Raises Guidance Despite Q1 Headwinds

DraftKings Inc. (DKNG) filed its 10-Q report on May 3, 2024, revealing strong financial performance and strategic positioning despite facing unfavorable sports outcomes in the first quarter. The company raised its full-year revenue guidance to a range of $4.8 billion to $5.0 billion, indicating growth of over 30% year-over-year.

Why this matters: The growth of online sports betting and iGaming companies like DraftKings has significant implications for the future of the gaming industry and state revenue streams. As more states legalize online gambling, companies like DraftKings will play a crucial role in shaping the industry's development and influencing regulatory policies.

DraftKings now projects 2024 Adjusted EBITDA in the range of $460 million to $540 million, up from its prior guidance of $410 million to $510 million. The company reported a net loss attributable to common shareholders of $143.249 million, compared to losses of $395.661 million in the year-ago quarter. On a per-share basis, DraftKings reported a loss of $0.30, narrowly missing analysts' expectations of $0.28 per share.

Currently, DraftKings operates in 24 states for online sports betting and 7 states for iGaming. The company is focused on product innovation, targeting "sticky customers" and sharpening its focus on operational excellence and disciplined capital allocation. DraftKings' Progressive Parlay feature is expanding into new sports and additional states.

In a statement, DraftKings CEO Jason Robins said, "DraftKings' performance in the first quarter of 2024 was outstanding, reflecting healthy revenue growth and a scaled fixed cost structure that positions us to drive rapidly improving Adjusted EBITDA." He added, "Looking ahead, we remain committed to maximizing shareholder value through continued innovation, operational excellence, and disciplined capital allocation."

However, DraftKings faced headwinds from unfavorable sports outcomes in the Super Bowl and March Madness, resulting in a $60 million impact to its revenue outlook and a negative impact of approximately $42 million to its fiscal year outlook. The company also continues to face litigation concerns and has a history of net operating losses.

Following the release of its first-quarter financial results, DraftKings gained 1.75% in the after-hours session to $43.78 a share. The company's shares have outperformed the gaming sector by approximately 22% year-to-date.

DraftKings' 10-Q report showcases a company focused on innovation, operational excellence, and disciplined capital allocation. Despite challenges from unfavorable sports outcomes and ongoing litigation, DraftKings remains well-positioned for growth in the rapidly expanding online sports betting and iGaming markets.

Key Takeaways

• DraftKings raises full-year revenue guidance to $4.8-$5.0 billion, up 30% year-over-year.
• Company projects 2024 Adjusted EBITDA of $460-$540 million, up from prior guidance.
• DraftKings reports Q1 net loss of $143.2 million, but beats analyst expectations.
• Company operates in 24 states for online sports betting and 7 states for iGaming.
• DraftKings shares gain 1.75% in after-hours trading, outperforming gaming sector by 22% YTD.