DraftKings Finalizes Acquisition of Jackpocket
DraftKings has successfully completed its acquisition of the digital lottery app Jackpocket for approximately $750 million. The deal, initially announced in February, is expected to generate up to $340 million in additional annual revenue. DraftKings is now focused on integrating Jackpocket into its operations, leveraging synergies for sustained growth and value creation.
Strategic Integration and Growth Plans
DraftKings aims to tap into the expansive US lottery vertical while enhancing its existing offerings. The integration of Jackpocket is expected to enhance customer lifetime value and bolster customer acquisition capabilities. This move will allow DraftKings to offer a more comprehensive range of products, improving its market position in the competitive landscape of digital gaming and sports betting.
Statements from Executives
Jason Robins, CEO and Co-founder of DraftKings, emphasized the commencement of their value creation plan. He stated, “We are ready to launch cross-sell programs, improve customer acquisition efficiency, and innovate our product portfolio.” Robins believes that the acquisition will significantly enhance DraftKings’ ability to attract and retain customers.
Peter Sullivan, CEO of Jackpocket, expressed confidence in the combined capabilities of the two companies. He said, “With DraftKings’ support, we can help lotteries fulfill their mission of delivering revenue back to beneficiaries.” Sullivan is optimistic about the future prospects of the partnership.
Overview of Jackpocket
Founded in 2013, Jackpocket offers customers a route to ordering official lottery tickets in multiple states. The app is available in 18 US jurisdictions, including New York, Texas, and Ohio. Jackpocket claims that its app was downloaded nine times more than its closest competitor in the fiscal year 2023, highlighting its strong market presence and customer appeal.
Financial Projections and Performance
DraftKings expects the transaction to drive $260 million to $340 million of incremental revenue and $60 million to $100 million of incremental adjusted EBITDA in fiscal year 2026. For fiscal year 2028, the company projects $350 million to $450 million of incremental revenue and $100 million to $150 million of incremental adjusted EBITDA. These projections underscore the significant financial impact of the acquisition on DraftKings’ overall performance.
Following an outstanding start to 2024, DraftKings raised its fiscal year 2024 revenue guidance to a range of $4.8 billion to $5 billion, up from the previous range of $4.65 billion to $4.90 billion. This represents a year-over-year growth rate of 31% to 36%. The adjusted EBITDA forecast also increased to $460 million to $540 million, compared to earlier guidance of $410 million to $510 million.
Expansion and Market Presence
In addition to the acquisition, DraftKings has been actively expanding its market presence. The company launched its sportsbook product in North Carolina on March 11, making mobile sports betting live in 25 states. DraftKings’ iGaming products are available in five states, and the company operates sportsbook and iGaming products in Ontario, Canada. DraftKings is also preparing for a sportsbook launch in Puerto Rico, further extending its reach.
Industry Context and Competition
The acquisition of Jackpocket strengthens DraftKings’ position in the digital gaming and sports betting market amid growing competition. For instance, ESPN Bet, a joint venture between broadcaster ESPN and betting firm PENN Entertainment, recently acquired a New York sports wagering license from WynnBet. Since its launch in November 2023, ESPN Bet has rapidly expanded to operate in 18 states across the US.
Recent Financial Performance
DraftKings’ Q1 revenue for 2024 reached $1.18 billion, marking a significant increase from $769.7 million in Q1 of the previous year. This impressive growth highlights the company’s strong market performance and its ability to capitalize on new opportunities. The revenue forecast for 2024 has been adjusted to between $4.80 billion and $5.00 billion, representing a year-on-year growth of between 31.0% and 36.0%.
Future Outlook
With the acquisition of Jackpocket, DraftKings is well-positioned to capitalize on the growing digital lottery market. The company plans to implement cross-platform promotion and customer acquisition strategies to enhance its offerings and improve customer retention. By leveraging Jackpocket’s established market presence and DraftKings’ extensive resources, the combined entity aims to deliver significant value to its customers and stakeholders.
In conclusion, the $750 million acquisition of Jackpocket marks a significant milestone for DraftKings. The integration of Jackpocket into DraftKings’ operations is expected to drive substantial revenue growth and enhance customer acquisition capabilities. As DraftKings continues to expand its market presence and innovate its product portfolio, the company is poised for sustained success in the competitive digital gaming and sports betting industry.
