The start of mobile betting in Massachusetts — along with increased wagering in other states — helped DraftKings post better first-quarter results than Wall Street analysts expected. The Boston-based company’s stock jumped as much as 19 percent in Friday morning trading.
DraftKings said first-quarter revenue increased 84 percent to $770 million, more than the $700 million analysts expected. And an adjusted loss per share of 51 cents was 31 percent less than a year ago and 25 cents per share better than analysts forecast. The company also raised the high end of its revenue forecast for 2023 to $3.24 billion from $3.05 billion.
DraftKings shares hit a high of $25.33 in trading on Friday, up 19 percent on the day and more than double the 2022 year-end price of $11.39.
In Massachusetts, which opened betting on mobile devices on March 10, DraftKings has acquired 6 percent of potential customers in the state so far, gaining new business at a faster rate than in some prior states. The company credited its growing reputation due to national advertising campaigns and reduced competition from some rivals that have cut back activity due to losses.
Chief executive Jason Robins said DraftKings’ ad campaign, which featured local sports stars such as David Ortiz and Aly Raisman, emphasized that the company was the hometown choice for betting.
“In New England, in particular, we tend to love our own here,” the CEO said on a Friday call with analysts. “So we feel like that was a really good angle for this market, and it worked.”
Analysts asked Robins if the company planned to accelerate growth by acquiring a competitor or offering betting in other countries, but he said no.
“What we’re doing is working, and companies all the time make mistakes by getting distracted when they have something that’s really working instead of just focusing,” Robins said on the call with analysts. “I think that’s something that we feel is really important to just continue to keep the team focused on — eye on the prize right now.”
Robins also hinted to analysts that the company might become profitable on an adjusted basis sooner than previously forecast. The company has said it will be cash flow positive excluding costs such as stock-based compensation and income taxes in 2024.
Analyst Bernard McTernan at Needham & Co. teed up a question for Robins: “Now that you’ve posted back-to-back quarters of really strong results on profitability, any changes to thoughts on long-term profitability or maybe getting to those long-term targets sooner?” the analyst asked.
Robins said his answer would have to wait for later this year. “We are planning on covering that at the [next] investor day,” the CEO said. “So I’ll hold off on comment on that until then, but we will certainly have more to say.”
In a report on the first-quarter earnings, McTernan wrote that DraftKings was “continuing to provide encouraging data points for the future profitability of the enterprise.”
Analyst Robert Fishman at SVB MoffettNathanson agreed. “After working to right size expenses while still managing to drive robust revenue growth, it seems to us that DraftKings has a solid path to keep building upon its recent momentum,” Fishman wrote in a report on Friday.