DraftKings shares rose as much as 8% in late trading Thursday after the sports gambling company released fourth quarter numbers that outpaced expectations and improved its outlook for 2023.
For the three months ending in December, DraftKings reported $855 million in sales, beating consensus estimates of $800 million. The company reported loss per share of $0.54, beating estimates of $0.59. The stock (NYSE: DKNG), which closed Thursday at $17.81, rose as much as 8% after the market closed before settling around 7%.
The move continues a strong start to the year for the Massachusetts-based company. After a rough 2021 and 2022, the stock was up 61% this year through Thursday close, one of many sports betting stocks to see renewed interest in the past few months.
The company also slightly improved its guidance for 2023 revenue as well as its forecast for 2023 adjusted EBITDA losses. That second number, which was a factor in DraftKings’ stock dipping 21% after its Q3 earnings, was raised to losses of $350-$450 million from a range of $475-$575 million. The company said it expects to be adjusted EBITDA positive in 2024, which would be a first since its founding in 2012.
“The financial world changed in 2022,” CEO Jason Robins wrote in a letter to shareholders. “Gone are the days of ‘free’ money. Gone are the days when investors would accept outsized losses as long as revenue grew or share increased.”
DraftKings was originally scheduled to release the quarterly numbers on Friday morning, and its analyst call will still take place at that time. No reason was reason was given for the early release. Executives will likely give an update on the company’s path to profitability during that call.
The fourth quarter is an important one for DraftKings, as it encompasses a majority of the NFL and college football seasons, which are two of the most heavily bet sports periods on the U.S. calendar. It does not include last week’s Super Bowl, which falls under the company’s first quarter of 2023.
One metric closely watched by investors: marketing spend. Most sports betting companies continue to operate at heavy losses, because they continue to spend big on customer acquisition both in new states and ones where the market is maturing. DraftKings’s “sales and marketing” in the quarter was $345 million (up from $278 million in Q4 2021). The company spent a total of $1.2 billion in the category for the full fiscal year.
Though many competitors are cutting back on those costs—particularly the casino brands like Caesars (Nasdaq: CZR) and MGM (NYSE: MGM)—DraftKings appears to be taking a different approach by maintaining its spend. As another data point, DraftKings was the only major U.S. book to increase its spending on digital ads surrounding the Super Bowl, according to data released this week by Eilers & Krejcik.
DraftKings’ quarterly reports also provide an update on the size of its customer base. The company had 2.6 million average monthly users in the quarter, up 32% from Q4 2021 (1.97 million) and 73% from Q4 2020 (1.5 million). Average revenue among those users was $109, up 42% from $77 in Q4 2021.
These numbers–like most of the company’s year-over-year comparisons–should be taken with a grain of salt. As sports betting and iGaming moves state by state across the U.S., the size of DraftKings’ geographical footprint (and the maturity of each market) increases with each quarter.