DraftKings on Course for Strong 2023 following Positive Q3
It appeared to be all doom and gloom for DraftKings heading into this year, after a decline in revenue towards the end of 2021, with multiple contributing factors.
As a result, it has subsequently been a big nine months for the brand, which has seen it almost go back to basics in order to build up shareholder and consumer confidence.
This has particularly been echoed by a positive Q3 that has seen a 161 percent increase in revenue of $493 million, and DraftKings has attributed this to a variety of reasons.
Better Strategy Aligned to increase Revenue
A tumultuous 2021 for DraftKings almost resulted in many in the industry believing that there was almost a scattergun approach to its business, leaving a widespread loss of confidence.
The failed and almost ill-thought-out bid to buy behemoth Entain was perhaps one reason for this, especially as they almost seemed to disregard one major problem and failed to pre-empt it. Of course, this was related to the fact that one of its primary competitor brands in the US market, MGM Resorts International has a joint venture with Entain, which caused a number of issues.
Then there were implications that the brand did not fully strategize its advertising plan, which led to considerable losses and low conversion rates, especially in the newly-regulated New York market, in January of this year.
However, it appears that a more aligned and focused customer acquisition strategy has led to increased numbers and also retention, while it has launched in new states with considerable success. The brand has also witnessed a higher hold rate from NFL wagering, which has potentially been related to less focus on overly aggressive promotional campaigns.
Our team continued to drive top-line growth through highly effective customer engagement and compelling product and technology enhancements while remaining focused on our path to profitability.
For the NFL season, we made investments in our mobile sportsbook product, creating a differentiated and fun customer experience, and also realized unique marketing optimization benefits as an operator with truly national scale.
Throughout 2022, we've struck the right balance between delivering differentiated top-line growth and driving operating efficiencies.
What Does 2023 Look like for DraftKings?
While it seems that the brand has more of a focused growth strategy, which is likely the biggest reason for its return to profitability, the key here is consistency going into next year.
This is something that Jason Park has been keen to impress on the company, stating: "Our results in the third quarter significantly exceeded the expectations that we provided on our second-quarter earnings conference call," explained Jason Park, DraftKings' Chief Financial Officer.
We are increasing the midpoint of our fiscal year 2022 revenue guidance by $45m and improving the midpoint of our fiscal year 2022 adjusted EBITDA guidance by $10m, which is a meaningful improvement given our prior fiscal year 2022 adjusted EBITDA guidance did not include our launch in Kansas on September 1, 2022, or fourth quarter investments ahead of our expected launches in Maryland and Ohio, pending licensure and regulatory approvals.
We are also introducing 2023 guidance for revenue and adjusted EBITDA which reflects our continued balance between driving attractive revenue growth and meaningfully improving our adjusted EBITDA.
An emphasis on a clear overall plan is likely to ensure that DraftKings can continue its upward trajectory over the next 12 months as it looks to reduce the losses of 2021 and improve the status of its overall balance sheet.