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DraftKings Inc. (DKNG)·Q4 2024 Earnings Summary

Executive Summary

  • Revenue was $1.393B, up 13% year over year, with strength in structural sportsbook hold and customer acquisition but offset by customer-friendly NFL outcomes; Adjusted EBITDA was $89.5M and Adjusted EPS was $0.14 .
  • Monthly Unique Payers rose 36% to 4.8M while ARPMUP fell 16% to $97, largely due to Jackpocket mix and lower actual hold despite structural hold improvement; excluding Jackpocket, MUPs +16% and ARPMUP -4% .
  • DraftKings raised the FY2025 revenue guidance midpoint to $6.45B (range $6.3–$6.6B) and reaffirmed FY2025 Adjusted EBITDA guidance of $900M–$1.0B; FY2025 guidance excludes year-to-date sport outcomes and the Missouri launch .
  • Management highlighted investments to extend leadership in live betting (acquisitions of Simplebet, Sports IQ Analytics, Muster Golf) and expects adjusted gross margin of 46–47% and free cash flow of ~$850M in FY2025, driving a programmatic buyback tied to FCF .

What Went Well and What Went Wrong

What Went Well

  • Structural sportsbook hold increased 80 bps YoY to 11.2% in Q4; NFL same-game parlay handle mix improved >600 bps YoY, supporting adjusted gross margins of 45% despite unfavorable outcomes .
  • Customer acquisition and engagement were strong; MUPs grew to 4.8M (+36% YoY) and management cited efficient CAC and retention across Sportsbook, iGaming, and Jackpocket, with Jackpocket providing a new acquisition channel .
  • FY2025 revenue guidance midpoint raised to $6.45B; management reiterated confidence in profitability trajectory and highlighted live betting initiatives expected to be EBITDA-positive from 2026 onward .

What Went Wrong

  • ARPMUP declined 16% YoY to $97, driven by lower ARPMUP for Jackpocket customers and lower actual sportsbook hold due to customer-friendly outcomes; excluding Jackpocket, ARPMUP decreased ~4% .
  • Adjusted EBITDA declined versus Q4 2023 ($89.5M vs. $151.0M), reflecting increased litigation/related costs and advocacy/legal expenses included in non-GAAP adjustments, even as structural metrics improved .
  • Q4 GAAP operating loss was $(139.2)M and GAAP EPS was $(0.28), continuing to reflect higher costs and non-cash charges; management noted discrete tax benefits tied to acquisition accounting but outcomes volatility can swing quarter-to-quarter performance .

Financial Results

Summary Metrics by Quarter

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD)$1,104,441 $1,095,490 $1,392,772
GAAP EPS ($)$0.12 $(0.60) $(0.28)
Adjusted EPS ($)$0.22 $(0.17) $0.14
Adjusted EBITDA ($USD)$127,967 $(58,504) $89,454

Selected P&L Detail ($USD)

Line ItemQ2 2024Q3 2024Q4 2024
Revenue$1,104,441 $1,095,490 $1,392,772
Cost of Revenue$663,414 $742,434 $834,644
Sales & Marketing$215,676 $339,943 $368,602
Product & Technology$92,655 $103,581 $112,063
General & Administrative$165,084 $208,126 $216,642
Loss from Operations$(32,388) $(298,594) $(139,179)

KPIs

KPIQ2 2024Q3 2024Q4 2024
Monthly Unique Payers (MUPs)3.1M 3.6M 4.8M
Average Revenue per MUP (ARPMUP)$117 $103 $97

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$6.2–$6.6B $6.3–$6.6B; midpoint raised to $6.45B Raised midpoint
Adjusted EBITDAFY 2025$900M–$1.0B $900M–$1.0B Maintained
Structural Sportsbook Hold %FY 2025N/A~11% Reiterated vs prior expectations
Sportsbook Net Revenue MarginFY 2025N/A7%–7.5% New disclosure
Adjusted Gross Margin %FY 2025N/A46%–47% (midpoint slightly higher vs prior quarter expectations) Raised midpoint vs last quarter expectations
Stock-Based Compensation (% of Revenue)FY 2025N/A~6% New disclosure
Free Cash FlowFY 2025N/A~$850M; ~$100M bridge from Adjusted EBITDA New disclosure
Scope/ExclusionsFY 2025N/AExcludes benefit of YTD sport outcomes; Missouri launch not included Clarified exclusions

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Live betting & structural holdEmphasis on higher structural sportsbook hold; investing in product features Structural hold 11.2% in Q4; investments via Simplebet/Sports IQ/Muster Golf; adjusted gross margin 45%; aiming for 46–47% in FY25 Increasing focus and performance
Promotional intensityARPMUP pressure from mix/new customer promos Continued optimization; management expects a “pretty meaningful decline” in 2025 promotional intensity Decreasing intensity
Jackpocket / digital lotteryAcquisition closed; cited as growth driver Strong acquisition during $1.2B jackpot; efficient cross-sell; potential to invest more Growing importance
Guidance trajectoryFY2025 introduced at $6.2–$6.6B; FY2024 revenue raised then later revised due to outcomes FY2025 midpoint raised to $6.45B; EBITDA range maintained Cautious optimism
Regulatory & taxesPlanned gaming tax surcharge in high-tax states (effective 1/1/2025) Managing Illinois tax via reduced promos/marketing; guides with no tax increases assumed for 2025 Managing headwinds
Capital allocation$1B buyback authorization Programmatic buyback tied to FCF; exploring debt markets; Term Loan facility announced More active, FCF-supported
International expansionLimited mentionOpportunistic stance; primary focus remains U.S./Canada; watchful for opportunities Watchful, not near-term

Management Commentary

  • “We continued to efficiently acquire and engage customers, expand structural sportsbook hold percentage and optimize promotional reinvestment in fiscal year 2024… Looking ahead to 2025 and beyond, I am excited to further enhance our customer economics through new initiatives such as extending our lead in live betting” — Jason Robins, CEO .
  • “In the fourth quarter, we generated $1.393 billion of revenue… structural Sportsbook hold percentage… increased 80 basis points year-over-year to 11.2%… Adjusted gross margins of 45%” — Alan Ellingson, CFO .
  • “We now expect 2025 revenues of $6.3 billion to $6.6 billion… and are reaffirming [2025] adjusted EBITDA… We continue to expect structural sportsbook hold percentage of approximately 11%… Sportsbook net revenue margin… 7% to 7.5%” — Alan Ellingson, CFO .
  • “We now expect our adjusted gross margin to be in the range of 46% to 47%… expect the bridge between adjusted EBITDA and free cash flow to be $100 million… expect to generate free cash flow of approximately $850 million in fiscal year 2025” — Alan Ellingson, CFO .

Q&A Highlights

  • Handle growth slowed in Q4 amid election distraction and one fewer NFL game; management has seen reacceleration in Q1 and remains confident in FY2025 trajectory .
  • Promotional intensity expected to decline meaningfully in 2025, aiding net revenue margins; buybacks will be programmatic and tied to free cash flow .
  • Live betting is a core focus with highest in-industry market uptime during the Super Bowl; adoption expected to grow with product improvements and lower-latency broadcasts .
  • Regulatory/tax: Illinois tax impact mitigated via reduced promos/marketing; 2025 guidance assumes no tax rate increases and no Missouri launch; Missouri investment timing will inform any EBITDA impact .
  • Product and customer initiatives: Jackpocket cross-sell is effective; DraftKings Plus subscription is a limited pilot; crypto payments could be considered pending regulatory comfort .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable at the time of this analysis due to request limits; estimates comparison is therefore not included.

Key Takeaways for Investors

  • Structural improvements in hold and mix are offsetting outcome volatility, with Q4 structural hold at 11.2% and adjusted gross margins at 45%; FY2025 adjusted gross margin guided to 46–47% supports margin expansion narrative .
  • FY2025 revenue midpoint raised to $6.45B and Adjusted EBITDA reaffirmed at $900M–$1.0B; guidance excludes YTD favorable outcomes and Missouri launch, providing potential upside levers .
  • Customer metrics are scaling well (MUPs +36% YoY) while promotional intensity is expected to decline in 2025; ARPMUP pressure from Jackpocket mix should normalize with product and pricing evolution .
  • Live betting investments (Simplebet, Sports IQ Analytics, Muster Golf) are a key strategic catalyst; management expects EBITDA neutrality in 2025 but positive contribution from 2026, providing an important medium-term growth vector .
  • Programmatic buybacks tied to FCF and recent debt market activity indicate a more active capital allocation posture; FY2025 FCF guide of ~$850M underscores balance sheet flexibility .
  • Regulatory exposure remains a swing factor (e.g., Illinois taxes), but management is proactively optimizing promos/marketing and guiding with conservative assumptions (no 2025 tax hikes baked in) .
  • Near-term trading catalysts: guidance midpoint raise, strong Super Bowl engagement records, and ongoing narrative around structural hold and live betting adoption; watch for Missouri timing and incremental legalization to enhance 2025/2026 trajectory .