While inflation and recessions worries have cast doubt on the state of the American consumer, gamblers haven’t been phased, at least according to DraftKings (DKNG) CEO Jason Robins.
“So far everything we’re seeing is consistent with what has been common knowledge about gaming — that under any macroeconomic conditions, it’s a steady cohort of customers,” Robins told Yahoo Finance Live (video above).
DraftKings released its second-quarter results on Friday morning, topping Bloomberg consensus estimates on earnings per share for the first time in eight quarters and lowering the company’s projected full-year adjusted EBITDA loss by $75 million. The company's $466 million in revenue topped a consensus estimate of $438 million, while a $0.29 loss per share was narrower than an expected loss of $0.84 per share.
The beat pushed shares higher as much as 18% in early trading Friday.
“We had a revenue beat, so some of that would flow to the bottom line,” Robins said of the positive results. “And then the company has been focused on trying to find cost efficiencies. Some of these will be timing-based so they’ll show up later in the year. But some are true cost efficiencies that are going to be realized fully and some which are in categories with fixed costs will increase in future years as well.”
DraftKings' numbers from the quarter support Robins’ point about the macro environment's lack of an impact on gambling activity. The company’s monthly active users reached 1.5 million in the second quarter, up 30% year-over-year. Average revenue per customer also rose 30% year-over-year, topping $103.
It’s worth noting, however, that part of that increase could also come from increased legalization broadening the potential customer base.
“Our customers are small-dollar bettors that are going to be placing bets of $5, $6 on a game,” Robins said. “It’s a great bang for your buck. They get hours of enjoyment and it tends to be something that’s quite sticky during periods of any macroeconomic condition. We have some higher-end bettors, too, and I imagine some of them are seeing their portfolios down but I don't think prices at the [gas] pump are affecting their lifestyle as much.”
Speculation around gambling demand during economic lulls emphasizes consumers cutting back on discretionary spending. Yet, Robins believes gambling is well-positioned in the entertainment category. With no betting minimums on the app, customers can seek entertainment for whatever price they’re comfortable with, rather than dining out or attending a movie where prices are decided by the business operator.
There’s also broader evidence that “sin stocks” perform well during economic downturns. For example, the “Sinful Stocks” index is up 35.78% over the past year, according to Yahoo Finance data, while the S&P 500 (^GSPC) is down nearly 7% over that time period.
Going further back in history, data indicates that some might see the economic downturn as a time to double-down. Robins, however, won’t be hanging his hat on that theory come NFL season this fall.
“We're focusing on the things we control,” Robins said. “Creating great customer experiences, great products, strong marketing based on analytics that we optimize constantly. All of those are things we control, and I think anything else that might be a tailwind, that would be nice, but we’re not counting it.”
Josh is a reporter and producer for Yahoo Finance.