DraftKings, a frontrunner in American sports betting and online gaming, surpassed anticipated financial goals in 2023. Encouraged by this success, DraftKings made a bold move early in 2024, acquiring the lottery and betting operator Jackpocketfor a substantial $750 million.
DraftKings' Remarkable Profits - Context
During the final quarter of 2023, the revenue of this Massachusetts-based fantasy sports giant soared to $1.231 billion, marking a 40% year-over-year increase. With the ongoing surge in earnings as 2024 unfolds, DraftKings has revised and elevated its revenue guidance and adjusted EBITDA for the year.
Presently operating in 24 U.S. states and the Canadian province of Ontario, DraftKings is gearing up for launches in North Carolina and the U.S. territory of Puerto Rico. The latest financial projections estimate a 2024 revenue range of $4.65 billion to $4.9 billion, accompanied by an upward adjustment of Adjusted EBITDA expectations to a range of $410 million to $510 million.
It is anticipated that DraftKings' acquisition of the lottery company will be concluded in the latter part of this year. Jackpocket, established in 2013, provides lottery resale and games in 18 states and has expanded its operations into iGaming in New Jersey.
Jackpocket And Commercial Strategy
"We are excited to step into the rapidly expanding U.S. digital lottery sector through the acquisition of Jackpocket," expressed DraftKings' co-founder and CEO, Jason Robins. "This move is poised to bring substantial value to DraftKings, not only by introducing another unique product to our customers but also by amplifying our overall marketing effectiveness, similar to the advantage our daily fantasy sports database provided in OSB and iGaming."
DraftKings attributes its stellar financial results in 2023 to robust customer acquisition strategies, the onboarding of new customers, expansion of bookmaker offerings, entry into additional markets, and continuous product innovation. These initiatives have yielded a more diversified betting mix and elevated sports betting retention rates.
In the concluding quarter of 2023, the company witnessed a remarkable 37% year-over-year growth in Monthly Unique Payers (MUPs), averaging 3.5 million. The average income per MUP also experienced a 6% increase from the previous year, reaching $116.
"Despite facing challenges in the fourth quarter due to the worst sports performance experienced as a public company, DraftKings concluded 2023 with robust results in customer acquisition, retention, and structural sports betting retention rates," explained Robins. "As we look forward to 2024 and beyond, our focus remains on the disciplined execution of our core strategic drivers: maintaining a customer-centric approach and adhering rigorously to our product roadmap to consistently differentiate ourselves in the competitive landscape."
DraftKings CFO Jason Park added, "In 2023, we fulfilled our commitment to delivering remarkable revenue growth and significant operating efficiencies."
DraftKings Tricky Move
Anticipating a positive adjusted EBITDA for the entire 2024, DraftKings is signalling significant progress towards the goals outlined at its Investor Day in November 2023.
While many industry observers in the U.S. gaming sector view DraftKings' acquisition of Jackpocket as a clever manoeuvre, seen as an attempt to leverage iLottery for the promotion of sports betting and iGaming, the regulatory landscape may not universally endorse this strategy. Critics, especially from anti-gambling activist circles, could cast harsh criticism on the move.
Operating at around 50% market penetration in the U.S. gaming market and 40% in the Canadian market, DraftKings envisions the acquisition contributing approximately $340 million in additional revenue and bolstering earnings. The adjusted EBITDA is expected to see an increment of around $100 million over a span of two years.
Expressing enthusiasm for the collaboration, Jackpocket CEO Peter Sullivan is a clear supporter of both DraftKings and his own company. He stated, "Together with DraftKings, we will bring tremendous value to our customer base while advancing our mission of creating a more convenient, fun, and responsible way to play the lottery," symbolically waving his winning ticket.
DraftKings has notably outperformed its key rival, FanDuel, and the gaming community is eagerly awaiting Flutter's response with great interest.
