DraftKings benefited from the popularity of sports betting in Virginia and across the US in the second quarter of 2024.
During its Q2 earnings call last week, the sportsbook reported $1.1 billion in revenue for the three months ending June 30, up 26% year over year.
Despite an expected decline in Virginia sports betting in June, the commonwealth has seen betting handle surpass $500 million nearly every month in 2024. Even though Virginia does not report individual operator totals, DraftKings is consistently first or second in every state where it operates.
DraftKings averaging more than 3 million new customers each month
DraftKings currently operates a sportsbook in 25 states, as well as in Washington D.C. Additionally, DraftKings has launched its online casino platform in five states. Its footprint in the online gaming industry is large and growing as more states expand gambling offerings.
Along with FanDuel, the Big Two control most sports betting markets across the US.
DraftKings CEO and co-founder Jason Robins outlines a few reasons for the company’s significant growth.
“We very efficiently acquired many more new customers than we expected and saw continued healthy existing customer engagement in the second quarter. We will continue to capitalize on the healthy customer acquisition environment for the rest of 2024, which positions us to achieve $900 million to $1 billion of Adjusted EBITDA in 2025. Additionally, we plan to implement a gaming tax surcharge in high tax states that have multiple mobile sports betting operators on Jan. 1, 2025, which could drive Adjusted EBITDA upside on an annual basis.”
The biggest driver of financial success for DraftKings was a jump in unique customers. The company said new users rose 50% YoY to a monthly average of 3.1 million. Even when its acquisition of online lottery service Jackpocket is excluded, monthly unique customers rose 34%.
DraftKings, however, said its existing customers are the foundation of its growth, both in the sports betting segment and the iGaming division.
Virginia sports betting continues to grow
Virginia sports betting has been steadily growing month after month since launching in 2020. In June, the sports wagering handle reached $415.4 million, a 27.6% YoY improvement.
In most states, DraftKings owns around 30% of market share. While FanDuel is a close competitor, no close third-place operator is putting pressure on the Big Two. That is why smaller sportsbooks like Betway have shut down operations in Virginia and the rest of the US.
Despite the large percentage of market share, DraftKings Sportsbook Virginia has plenty of room for growth. The state has not yet legalized online casinos. DraftKings would certainly be a major player in a Virginia online casino industry as well.
DraftKings raises expectations for the rest of the year
DraftKings was so successful in Q2 that the company has increased revenue projections for the second half of 2024.
Previously, the company set revenue projections between $4.8 billion and $5 billion. It now projects revenue between $5.05 billion to $5.25 billion.
With its success, DraftKings CFO Alan Ellingson said the company has authorized $1 billion of share repurchases.
“We are very excited about DraftKings’ free cash flow trajectory. In light of that, we are pleased to announce a $1 billion inaugural share repurchase authorization, which reflects our confidence in the company’s attractive long-term outlook and healthy balance sheet.”
Virginians won’t pay DraftKings’ proposed betting surcharge
In its earnings call, Robbins announced plans to counteract high sports betting tax rates across several US markets by imposing a betting surcharge on winning bet slips.
For example, DraftKings used a sample Illinois bet slip with an “Illinois Gaming Tax Surcharge” of $.32 on a $20 bet, or a 3.2% surcharge.
The states that would incur the surcharge are New York, Pennsylvania, Illinois, and Vermont. All of these states have sports betting tax rates >20%. Virginia, by comparison, taxes all operators a flat 15% on adjusted gross income.
So, Virginians can count themselves lucky that they won’t have to pay an extra surcharge on their winnings to bet with DraftKings.
