Earnings season is right around the corner with online sports betting companies hoping for a good first-quarter report to set the tone for what should be a profitable full year for many.
The earnings calendar is a bit slow through next week, with Kambi‘s call on Wednesday morning the only must-listen. The calendar picks up significantly the week after with four key sports betting operator calls:
- Caesars: 5 pm, April 30
- MGM: 5 pm, May 1
- Penn Entertainment: 9 am, May 2
- DraftKings: 8:30 am, May 3
Here are some key questions to consider in advance of Q1 2024 reports:
Will DraftKings continue to beat and raise guidance?
DraftKings has seven straight quarters of beating internal expectations and improving guidance. Naturally, investors would like to see that continue as the outperformance has been key to the stock’s surge since the beginning of 2023: DraftKings opened Wednesday at $45.07, up nearly four times on its $11.39 price at the end of 2022.
DraftKings raised its 2024 adjusted EBITDA guidance to $460 million at the midpoint after a strong fourth quarter and seeing how the first quarter started, which was up from a $400 million midpoint initially.
That increase came from two key areas for DraftKings, Chad Beynon of Macquarie said following DraftKings’ fourth quarter earnings: stronger player metrics and improved structural hold.
Is ESPN Bet delivering for Penn?
ESPN put up some record digital numbers in terms of engagement so far in 2024. Whether that translates to more bettors for ESPN Bet or not is something many in the sports betting industry will be watching.
According to cited Comscore data, ESPN Digital had 103.4 million unique visitors in February, or 47% of all users in the US sports category. That makes it 24 straight months as the top operator in the category.
ESPN on YouTube had 42.6 million unique users and 726 million total minutes, up 23% and 77%, respectively, from February 2023. It also saw the 32nd straight month as the top social channel among sports properties with 652 million engagements in February.
An added bonus on the Q1 Penn call would be additional color around how the app performed for the women’s March Madness NCAA Basketball final, which saw a record 18.7 million average viewers, on ESPN and ABC. That game took place after the period, though, so it may be a discussion topic on the Q2 call instead.
Is sports betting promo spend staying rational?
The first quarter is key in terms of customer acquisition. NFL betting during the playoffs, Super Bowl betting and March Madness betting present some of the strongest annual opportunities to bring in new players.
There are two other reasons why promotional spending could be inflated in the first quarter. The first is something operators could prepare for: the launch of sports betting in North Carolina, where companies spent more than $200 million on promotions in the first 20 days.
The second reason is more unpredictable and falls on the shoulders of new market entrants ESPN Bet and Fanatics. If one or both were exceptionally aggressive in their acquisition push, that could have led some operators to overextend on their marketing budgets.
Jeffrey Stantial of Stifel said promotional spending seemed rational through the Super Bowl and into March Madness.
Will operators talk sports betting tax increases?
One issue on the minds of anyone involved in the industry is the trend of sports betting tax increases.
So far, only Ohio has done it, with its tax rate doubling to 20% during its launch year. Illinois and New Jersey both have bills that would increase betting taxes as well.
Some operators have been more vocal than others about tax rate issues. DraftKings CEO told New York legislators it may have to offer worse odds in the state if the 51% tax rate was not lowered.
An advisor of former New York Gov. Andrew Cuomo told LSR he was surprised New Jersey is not going higher than 30% after seeing New York’s success.
