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DraftKings has reported a 34% year-on-year rise in revenue to $417m for Q1 2022 although net losses at the company deepened on both an annual and sequential basis.

Net losses for the three months ended 31 March came in at $467.7m, representing a further stretch into the red of 35% year-on-year and 43% quarter-on-quarter.

The operator also made an adjusted EBITDA loss of $289.5m in Q1, although this result was 12% better than guidance provided by management suggested in Q4 of 2021.

As a result, DraftKings has improved its full-year 2022 adjusted EBITDA guidance from a worst-case scenario deficit of $925m to $840m.

It has also raised 2022 revenue forecasts from a range of $1.85bn to $2bn to between $1.93bn and $2bn, which would equate to annual growth of between 49% to 56%.

However, the new guidance does not include contributions from its recently completed acquisition of Golden Nugget Online Gaming (GNOG), nor from the expected launch of online sports betting and iGaming operations in Ontario from Q2.

These two tailwinds will contribute up to an additional $150m in full-year revenue but a further decline of between $50m and $70m for adjusted EBITDA, according to estimates from CFO Jason Park.

Sales and marketing costs increased by 40.6% year-on-year to $321.5m, likely made worse by new state launches in both New York and Louisiana. The operator did not quantify the cost of launching mobile sports wagering in New York, whereas some competitors have published bottom line figures excluding The Empire State in the past week.

DraftKings CEO Jason Robins on GNOG: “Until we closed the deal, there were limitations with what the engineering team could have access to, so a lot of what you learn happens in the weeks after you acquire.”

CEO Jason Robins does expect marketing costs to improve in the coming quarters, however, as the business increases its national advertising mix over state-specific spend, which has already bolstered the firm’s profitability profile in New Jersey, according to Robins.

“DraftKings delivered significant growth across our key revenue and performance metrics,” said Robins. “We are not seeing any impact from inflationary pressures on customer demand, and we continue to improve the user experience by adding breadth and depth to our DFS, mobile sports betting and iGaming products.

“We are also improving our efficiency in acquiring and retaining customers and have a strong pipeline of new jurisdictions to enter,” he added.

Monthly Unique Payers (MUPs) increased by 29% year-on-year to two million monthly unique paying customers in Q1 for online sportsbook and iGaming, although DFS MUPs declined during the quarter.

Average revenue per MUP (ARPMUP) stood at $67 in Q1, up 11%. This was primarily driven by strong customer engagement and a continued revenue mix shift into iGaming product, although was partially offset by low hold rates during NCAA basketball and a rise in promotional intensity in newly launched states, and especially New York.

DraftKings is now live with mobile sports betting in 17 states that represent around 36% of the US population. The company is also live with iGaming in five states, representing approximately 11% of the population.

DraftKings bolstered its iGaming portfolio by sewing up the all-stock acquisition of GNOG this week. Analysts were keen to understand the integration timeline, with Robins suggesting a platform migration would contribute to $300m in eventual synergies.

“We have a strong integration plan so everyone knows what they need to do to perform that migration,” said Robins on the operator’s Q1 earnings call.

“Until we closed the deal, there were limitations with what the engineering team could have access to, so a lot of what you learn happens in the weeks after you acquire.

“We are not prepared to put a timeline on that integration now but will do in August and fully intend to do so,” he added.

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