DraftKings CEO: Parlays ‘Win-Win’ For Customers, Company

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Adding more options for parlays is a “win-win” for both DraftKings and its customers, CEO Jason Robins said.

Robins made the comments Tuesday at MoffetNathanson’s Inaugural Technology, Media and Telecom Conference.

“It’s a great example of a win-win for the customer and the business.” Robins said of parlays.

According to Robins, parlays give customers an enticing value proposition to win multiples on their original stake. DraftKings, meanwhile, sees its hold tick up.

“We’ve seen no decline in demand as we’ve increased hold rate,” Robins said. “The important thing is we’re not increasing it by making the odds any worse for customers. It’s just by pushing more parlay mix and things like that.”

Robins: DraftKings cutting costs efficiently

DraftKings announced plans to cut costs on its 2022 fourth-quarter earnings call, which included significant layoffs. The plans allowed the company to cut its expected adjusted EBITDA losses for the year to $400 million at the midpoint, compared to $525 million at the midpoint.

About $50 million of savings will come from external marketing, Robins said on the call. So far, that has not hurt revenue.

“I think we’ve done a great job of that and both proven that we can grow revenue at a rapid clip and reduce costs at the same time, which is something I don’t think anybody thought we could do. … I think everybody thought when we pulled back on a lot of our costs that our revenue growth would suffer but it’s been the opposite.”

Everyone in the industry is starting to pull back on marketing, Robins noted. He called the 2021-22 NFL betting season the “peak of irrationality” when it came to promos, and since then, the market has “completely flipped on its head.”

Everyone in the company looking to save

The concept of saving is not just for management, CFO Jason Park said Wednesday at a different conference, the 18th Annual Needham Technology & Media Conference.

Park said he received an email from a mid-level employee about an area where money can be saved, which he said is an “awesome indication.”

“That’s a nice internal flywheel that will continue to pay dividends,” Park added.

DraftKings: improving at simplifying for investors

What seems like a simple business is actually pretty complicated, Robins said.

“There are so many moving parts and even, like, I’ll ask questions internally, and I’m pretty data-driven and pretty in the numbers on that stuff for a CEO, and there are things where I’m like, ‘Huh?’ And then someone is like, ‘Oh,’ and an explanation makes sense.”

Robins explained one instance of confusion when there was a $500,000 revenue swing between New York and New Jersey that did not match the company’s monthly forecasts. It wound up being one of DraftKings’ whales that travels between both states and happened to mostly win in one and lose in another that month, he said.

The company is getting better at simplifying the story for investors, though.

“I do think we’re getting better at that and as we have more data it’ll be easier,” Robins said.

National marketing helps turn profit faster

The path to profitability in new states like Maryland, Massachusetts and Ohio is much faster than earlier state launches, Robins said.

DraftKings acquired 6% of the adult population in Ohio as customers in the first two months. It took years to get to that point after the 2018 launch in New Jersey, Robins said.

The awareness brought by national advertising has bettors “raring to go” once their state launches online sports betting, Park said.

DraftKings is willing to invest in a customer as long as gross profits over two to three years pay back that cost, Park said. Right now, that payback is faster than that range, he added.

DraftKings not looking at major deals

DraftKings recently launched the DraftKings Network, but do not expect to see major sports on there anytime soon.

While Robins prefaced his comments with “never say never,” that is not something on the table right now.

The point of DraftKings Network is to displace marketing costs. With its own network, DraftKings can stop spending to buy space on external media and eventually have its own platform that generates enough marketing revenue to pay for itself and then some, he said.

Sinking tens or even hundreds of millions into rights fees is not the way to do that, Robins added.