(Bloomberg) — When sports betting operator DraftKings Inc. announced a series of leadership changes in March, more attention was focused on the outgoing CFO than his successor.

Co-founder and CEO Jason Robins has tapped Jason Park to fill the new role of chief transformation officer, ending his nearly five-year tenure as CFO. Park’s replacement was Alan Ellingson, DraftKings’ senior vice president of finance and analytics.

The news came as a surprise, but markets received it as pleasant, with shares rising 13% in the week of the announcement. Although Ellingson, 45, had never been a CFO, analysts were confident; Morgan Stanley’s Stephen Grambling said the newcomer played a “significant” role in shaping DraftKings’ long-term forecast for 2023, reassuring investors that “the long-term strategy is unchanged.”

“I love the challenge,” Ellingson said on Bloomberg Chief Future Officer.

Since taking over as CFO on May 1, DraftKings has completed the $750 million acquisition of lottery app Jackpocket and announced a deal to purchase in-play betting platform SimpleBet . It made headlines in August when CEO Robins revealed plans to implement a surtax on bettor payouts in high-tax states – only to reverse course shortly afterward, citing customer feedback . Ellingson led the company’s first profitable quarter since going public in 2020, then reported another loss last week.

DraftKings also cut its full-year revenue forecast to a range of $4.85 billion to $4.95 billion, below the average analyst estimate of $5.13 billion, due to of “friendly sports results” at the start of this quarter. Nonetheless, DraftKings projects revenue for 2025 to be between $6.2 billion and $6.6 billion. “The fundamentals are extremely strong,” Robins said.

The upward trajectory of revenue puts the novice CFO in the enviable position of focusing on long-term efficiency without immediate pressure to reduce expenses. “We want to grow revenue within our existing cost structure, and there’s no need to cut costs as long as we’re efficient with what we allow our cost growth to be,” Ellingson told Bloomberg.

Robins echoed that assessment. “We don’t necessarily need it to make a profit next quarter or next year,” the CEO said. “It’s much more about how we build the most efficient and scalable business for the long term so we can win competitively and with the customer. »

Analysts are favorable, with the percentage of buy ratings on the stock – 82% – near the highest since 2020. But investors haven’t been as patient. Shares fell 18% through Nov. 8 after hitting a 2-1/2-year high in March following the management shakeup, trailing the Russell 1000 index’s 15% gain.

Betting boom

The company’s main U.S. rival is FanDuel, a subsidiary of Irish gambling giant Flutter Entertainment Plc. Together, they control more than two-thirds of a market where revenues have grown more than 2,000% since 2018, when the Supreme Court struck down the state of Nevada’s restriction of legal gambling betting. Sports betting is now legal in some form in 38 states and the District of Columbia. According to the American Gaming Association, Americans wagered $119.8 billion on sports in 2023, with operators raking in $10.92 billion in revenue.

DraftKings is poised to win as more states legalize online casino gaming, or iGaming. The purchase of Jackpocket gives DraftKings a platform to develop products for this expected audience and ultimately create a unique integrated site. “When we’re able to upsell one customer on a product to another, it definitely increases long-term customer value and engagement,” Ellingson said. While pressure from land-based casinos slows iGaming adoption, DraftKings still projects $350 million to $450 million in additional revenue from Jackpocket in 2028 in the jurisdictions where it currently operates.

Ellingson joined DraftKings in 2020 just before its IPO and was clearly ready for the promotion to CFO, Robins said. “We had seen so much of him and he had had so much exposure to all functions of the company,” the CEO said. “I knew he got it, I knew he got it. There was no doubt about it.

Although familiarity may give him an advantage, Ellingson says his training in analytics has taught him to resist complacency. “We are in an evolving industry,” he said. “We are constantly evolving and adjusting and adjusting our expectations of how things should work.

“Being analytical means not being content with your current situation, but rather constantly trying to improve your models and formulas to better understand what is happening. »

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