Robins: ‘Market is naturally consolidating’
DraftKings beats forecasts and looks to continue momentum +More
Good afternoon. On today’s Earnings Extra agenda:
DraftKings says it has chased down BetMGM in iCasino and is now pursuing FanDuel in OSB.
DraftKings ‘chasing down leaders’
CEO Jason Robins says chasing FanDuel ‘gives us a target’.
Centrifugal: Instead of consolidation being driven by M&A, CEO Jason Robins noted the process was taking place naturally, particularly in new states such as Massachusetts where DraftKings and its rival FanDuel were gaining greater market share from the off.
Asked about how DraftKings sees its rivalry with FanDuel, Robins said “we don't take anything for granted”.
“We assume that there’s always going to be a very competitive market and that we don’t assume we’ve won anything or that we have anything that we can bank on yet.”
He added that having FanDuel ahead of it in OSB was “helpful”. “It gives us somebody on the OSB side to feel like we can chase down.” Similarly, in iCasino, Robins said DraftKings had been “chasing down” BetMGM and had passed it in that sector in Q1 with 26% share across all states.
“At the same time, we also understand that new competitors can enter the market and we can’t take anything for granted,” he added.
On M&A, he said it was “not really a focus”. “But it doesn’t mean that down the road M&A doesn’t become more interesting.”
Recall, DraftKings said overnight that Q1 revenues were up 84% to $770m while adj. EBITDA losses were trimmed back to $221m, meaning DraftKings beat forecasts.
The company also raised FY23 guidance, with revenue now predicted to come in at $3.1bn-$3.2bn, while FY adj. EBITDA losses will be at $290m-$340m compared to previous estimates of up to $450m.
Robins said DraftKings was on the cusp of achieving adj. EBITDA profitability. “We will be breakeven in Q2,” he added.
Robins acknowledged DraftKings had been helped by better hold than was anticipated, contributing ~$15m of adj. EBITDA improvement. Part of this was down to the greater parlay mix, he added.
Other improvements came from its parlay product, which CFO Jason Park said was worth another ~$15m of adj. EBITDA.
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Momentum play
Talking about tailwinds, Park said DraftKings had “optimized” its new state playbook while new markets also benefited from the effects of national advertising”.
“There is a lot of momentum in the industry, that helps with the faster ramp and competitively, there has been a lot more consolidation into the top two players and that is driving it as well.”
Mass transit: Asked about whether he was pleased with the outcome in Massachusetts, where DraftKings narrowly missed out on gaining top spot on market debut, Robins said the company had very much played on its home state characteristics.
“That was a really good angle for this market and it worked,” he said. “Otherwise, it is the same new state playbook we have been optimizing in 20-plus states now.”
With the final question of the call, Park reiterated that the company had no need for further capital raises. Note, net losses for the quarter came in at $397m, down from $468m in Q122.
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