DraftKings (NASDAQ: DKNG) conducted its first-quarter earnings conference call earlier today, highlighting parlays and prediction markets as two of the key themes.
In midday trading, shares of the sportsbook operator rose even though the gaming firm reduced its 2025 guidance, forecasting adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) between $800 million and $900 million on revenues ranging from $6.2 billion to $6.4 billion. That contrasts with an earlier forecast of EBITDA ranging from $900 million to $1 billion on revenues between $6.3 billion and $6.6 billion, with favorable customer results in the January to March timeframe being the cause.
Co-founder and CEO Jason Robins mentioned that had favorites not won at such a high rate during the NCAA Men’s Tournament, DraftKings would have increased its financial forecasts for 2025.
"For the first time in tournament history, all four number one seeds reached the final four and three number two seeds and one number three seed reached the elite 8. Across the entire tournament, higher seeds won at an 82% rate, which is the highest rate in history,” said Robins on the call.
The matter of "chalk" succeeding at rates above average in the NCAA Tournaments was already factored into DraftKings. This created the context for the earnings call to concentrate on different matters, such as the sportsbook's parlay opportunities.
Parlays Boost DraftKings Performance
DraftKings’ CFO Alan Ellingson informed analysts that the operator's structural sportsbook hold for the first quarter was 10.4%, surpassing internal expectations and benefiting from a year-over-year rise of 370 basis points in the mix of parlay handle.
That’s a sign that more new customers are starting to adopt accumulator bets. There is evidence indicating that DraftKings has ways to compensate for the absence of NFL games on the schedule and the conclusion of the NBA season – significant from a parlay perspective, as these sports represent two of the highest structural hold categories and are particularly favorable for same-game parlays (SGPs).
“We’ve had tremendous year-over-year gains in terms of both SGP and parlay mix and overall average live count,” said Robins regarding what DraftKings early in the Major League Baseball (MLB) season.
He mentioned that in April, the year-over-year MLB handle increased by 36%, indicating possible prospects as the US sports calendar approaches a time when both the NFL and NBA are absent.
Robins Talks About Prediction Markets
Last month, DraftKings withdrew an application with the National Futures Association (NFA) that might have paved the way for the company to enter the rapidly expanding prediction markets sector, but Robins indicated the operator is still observing the area. The CEO of DraftKings noted that the presence of derivatives exchanges providing sports event contracts is initiating discussions regarding regulation.
“I think as it continues to grow, that’s just going to continue to be a powerful lever that this is happening whether you want it to or not, so do you want to do it in a way that makes sense,” he said in response to an analyst question. “If you’re a California tribe or if you’re a state that hasn’t legalized it yet, does it allow you to prosper or do you want to watch it happen somewhere else, and I think that’s something that everybody is talking about right now.”
Earlier this week, Flutter Entertainment (NYSE: FLUT), the parent of FanDuel and a competitor of DraftKings, announced that it is keeping an eye on the prediction market landscape in the US and may consider related ventures in the future due to its experience in the field through Betfair Exchange.
