DraftKings sees Q4 2022 revenue jump 81% as cost cutting yields benefits
Boston-headquartered operator reports top-line growth as adjusted EBITDA losses shrink to $50m
DraftKings has confirmed an 81% year-on-year (YoY) increase in its revenue for the fourth quarter of 2022 to $855m.
Releasing its financial data for the period, the Boston-headquartered operator revealed a 25% YoY reduction in net losses to $242.6m, while the company’s Q4 2022 adjusted EBITDA losses shrunk 61% YoY from $127m in 2021 to just $50m.
Pro forma costs, inclusive of sales and marketing, product and technology, and general administrative costs, amounted to $601m, a figure up by 2% from that reported during Q4 2021.
DraftKings’ cost of revenue rocketed 91% YoY during Q4 2022 to $485m from a prior year high of $253m. Operational losses fell 37% YoY to $232m over the same period.
The firm attributed these results to “continued customer retention and monetization” in existing states as well as sportsbook and igaming launches in new jurisdictions and “structural” sportsbook hold improvement.
Monthly unique players (MUPs) increased to 2.6 million during Q4, a YoY increase of 31% compared to 2021. Average revenue per MUP (ARPMUP) amounted to $109 during Q4, representing a 42% increase compared to the same period in 2021.
“This increase was primarily due to improvement in the company’s structural sportsbook hold rate and a continued mix shift into DraftKings’ sportsbook and igaming products,” DraftKings stated.
DraftKings has said it expects fixed expense growth to “slow meaningfully” during FY 2023, decelerating even further in 2024, with the company expecting to achieve a positive adjusted EBITDA figure in 2024.
The operator has confirmed available cash of $1.3bn as at December 31, 2022, with an expectation to have more than $700m in available cash by the end of 2023.
DraftKings CEO and co-founder Jason Robins welcomed the Q4 2022 results, issuing a letter to shareholders in which he hailed 2022 as a year of “tremendous” results.
“I am very pleased with how we concluded 2022, with continued top-line growth and strong focus on expense management,” Robins wrote.
“In the fourth quarter, we grew revenue by 81% versus last year and delivered positive adjusted EBITDA in October and for the quarter when adjusting for our launch costs in Maryland and Ohio.
“Moving into 2023, we will continue to drive revenue growth and focus on expense management to accelerate our adjusted EBITDA growth.
“We have already taken several actions that resulted in an increase to our revenue guidance and significant improvement in our adjusted EBITDA guidance,” Robins concluded.
Following the results, DraftKings has raised its fiscal-year 2023 revenue guidance to a range of between $2.85bn and $3.05bn from a previous range of between $2.8bn and $3bn, announced in Q3 and equating to YoY growth of 27% to 36%.
In tandem with the revision of revenue targets, DraftKings has revised its adjusted EBITDA guidance figures to a loss of between $350m and $450m in 2023, down from a prior guidance figure of between $475m and $575m.
Delivering his assessment of DraftKings results, Regulus Partners analyst Paul Leyland highlighted the influence of both high consumer demand reducing DraftKings “cost problem” as well as increased igaming reducing the impact of seasonality on its financial results.
“The key question for 2023 and beyond whether these volumes can be sustained in quiet sports quarters to solve the crippling cost of revenue line especially: cutting staff only provides limited relief when c 80% of the cost base is external,” Leyland explained.
“As the #2 US sportsbook operator, with significantly enhanced iGaming capability through the GNOG acquisition, there are reasons to be optimistic.
“However, with net cash falling by 40% over the year, to US$1.3bn or 2x FY22 burn rate, and capital markets now unforgiving of supporting operating losses, DraftKings can no longer easily spend its way to growth.
Leyland continued: “Whether being an operationally effective first mover leads to medium-term customer loyalty advantages or vulnerability to churn will likely be answered for DraftKings’s this year.
“If US customers do demonstrate loyalty as incentives decline (as they did by 600bps in FY22), this will illustrate another major point of difference to most other markets,” he added.