DraftKings Blows Past Q1 Revenue Record as More States Legalize Online Wagering

Virtual sports betting is looking like a sure thing as DraftKings delivered a strong start to the year with more states legalizing online sportsbook (OSB) and iGaming wagering.

Reporting earnings for the first quarter of 2023 Friday (May 5), DraftKings co-founder and CEO Jason Robins said the sports betting platform is “on the cusp of achieving profitability” and expects to reach breakeven in the second quarter.

Now operational in 22 U.S. states and Ontario, Canada, DraftKings increased revenue by 84% in Q1 2023 compared to Q1 2022, which executives attributed to strong customer acquisition, especially in newer markets like Ohio and Massachusetts.

“[W]e are acquiring customers efficiently and gaining share primarily due to highly productive national marketing combined with our differentiated product offerings that are enabled by our vertically integrated tech stack,” Robins and Chief Financial Officer Jason Park said in a shareholder letter. “In the first quarter, new users increased 57% year over year while our customer acquisition cost (CAC) declined 27% year over year.”

On the call, Robins told analysts that “DraftKings has continued to introduce unique sports wagering opportunities by most recently launching live in-game parlays for MLB supported by our in-house trading platform. We continue to invest in our in-house trading capabilities and technology in advance of the NFL season this fall. In iGaming, we estimate that we achieved No. 1 [gross gaming revenue (GGR)] share in the U.S. at 26%.”

More Ways to Play

Robins pointed to the prolific introduction of new OSB and iGaming experiences, including the exclusive DraftKings jackpot product now live in three states across more than 100 slots and table games, as well as DK Horse, a standalone horse racing app that debuted in March and offers wagering on races on hundreds of domestic and international tracks “including all three Triple Crown races beginning with this weekend’s Kentucky Derby,” he said.

Turning to legalization trends, DraftKings noted that Kentucky has authorized mobile sports betting, “and, in 2023, 12 states that collectively represent approximately 24% of the U.S. population have either introduced legislation to legalize mobile sports betting or introduced bills that may result in sports wagering referendums during an upcoming election.”

They added that iGaming legalization is also progressing “with five states that collectively represent approximately 14% of the U.S. population having either introduced legislation to legalize iGaming or introduced a bill that may result in an iGaming referendum during an upcoming election.”

More States Move to Legalize

Pressed for additional details on legalization, Robins said: “The states that we are seeing active bills that I think have a shot of moving [include] Texas — we’ll see, it’s different by the day what I hear there. North Carolina, Minnesota and I think Vermont are the ones that have the best shots at moving. Kentucky of course already passed this year.”

He gave no more details on the timing of the product launch in Kentucky, however.

In terms of gaming taxes, platform costs, processing costs and revenue share agreements, Park said: “Elements like taxes are fairly well known from a statutory tax rate. On platform costs, we continue to be very thoughtful about vendors that sit within our platform, and you hear us talking about bringing in-house more of our game offerings both on the OSB and iGaming side.”