DraftKings Expects Big Numbers in 2025

DraftKings, which reported uneven financial results for the second quarter of this year, has reaffirmed its projection for the fiscal year 2025, estimating earnings of about $1 billion. The company’s better client acquisition metrics, which are widely monitored data points in the gaming business, are one reason for the optimism. According to a letter to shareholders, DraftKings saw a nearly 80% increase in its sports betting and iGaming user base for the three months ended June 30. According to DraftKings, throughout this period, client acquisition costs decreased by almost 40%, a positive development that is indicative of faster paybacks.

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DraftKings anticipates $900 million to $1 billion in Adjusted EBITDA in 2025 due to underlying business strength. Until then, DraftKings anticipates $340 million to $420 million in Adjusted EBITDA for the fiscal year 2024. The company had previously given expectations for FY 2024 that fell between $460 million and $540 million. “We very efficiently acquired many more new customers than we expected and saw continued healthy existing customer engagement in the second quarter,” said Jason Robins, DraftKings’ CEO, in a statement.

DraftKings generated $1.10 billion in revenue for the quarter, $230 million more than the same time in 2023 (a 26% increase). DraftKings’ quarter-over-quarter sales of $1.12 billion came up just short of experts’ projections. Additionally, DraftKings revealed Adjusted EBITDA of $128 million, which was just less than the $129.3 million experts had predicted. DraftKings announced non-GAAP earnings per share of $0.22, exceeding analysts’ $0.19 estimate.

A number of negative sports results are one reason for the income miss. The MLB teams who were most bet on won at a higher rate than anticipated during a two-month span that started in June, according to DraftKings. Even so, DraftKings’ structural sportsbook hold rate increased as anticipated, coming in at roughly 10% for the quarter.

DraftKings’ announced plan to put a surcharge on gamblers’ wins in specified jurisdictions was a heated issue during the conference. In accordance with the proposal, DraftKings will impose the fee in Illinois, New York, Pennsylvania, and Vermont starting in the next year.

The plan was created by DraftKings in reaction to rising tax rates in some states. For example, early this year, Illinois implemented a new progressive tax rate on the proceeds from sports betting. The changes increase the tax rate for operators who meet specific thresholds from 15% to up to 40%.

In response to a query on the industry-wide ramifications from Jeffries analyst David Katz, Robins said that more sportsbooks might implement a similar strategy. Robins referenced laws from Germany and Australia that impose a fee on gaming companies since their tax rates are quite high. Every one of the four states has a tax rate of at least 20%; New York has the highest rate in the country at 51%. Although Robins does not see plans to change the policy, he made it clear that DraftKings will be keeping a careful eye on consumer input. 

Robins also made references to a number of other areas where surcharges are typical, including the hotel and taxi sectors. According to Robins, DraftKings decided to be transparent about the policy rather than conceal it as a hidden line item. He thinks that eventually, clients would value the openness. An earnings presentation stated in an example that there would be a 32-cent charge added to a $20 winning bet in Illinois. The fee amounts to 1.6% of the customer’s earnings at that rate.

DraftKings was down 1.6% from the previous day’s finish at $35 per share before to Friday’s results call. DraftKings’ stock fell 11% to $31 per share after the conference call. When DraftKings reported its second-quarter earnings last August, the stock was trading in the low $30s. DraftKings’ stock is still up roughly 19% from its October lows.Check out our review on DraftKings.