DraftKings raises 2024 guidance but misses Q4 adjusted EBITDA target

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DraftKings has raised its 2024 guidance following a fourth quarter of 2023 in which the operator saw a 44 per cent increase year-over-year in revenue.

However, the operator missed its Q4 adjusted EBITDA target of approximately $200m by close to $50m, which it attributed to “customer-friendly sport outcomes” during November.

In addition, DraftKings has also gained access to the US lottery market after reaching an agreement to acquire the lottery app Jackpocket for a total consideration of approximately $750m.

DraftKings misses adjusted EBITDA target

Publishing its financial results, DraftKings reported a 44 per cent increase YoY in revenue to $1.23bn during Q4 (Q4 2022: $855m). For the full year, revenue came in at $3.67bn, up on the previous year’s $2.24bn.

The operator attributed the rise in Q4 to “continued healthy customer engagement, efficient acquisition of new customers, the expansion of the company’s sportsbook product offering into new jurisdictions, and product innovation leading to increased parlay mix and thus higher structural sportsbook hold percentage”.

However, DraftKings failed to meet its Q4 adjusted EBITDA target of approximately $200m previously communicated during its Q3 earnings report, as the figure came in at the end of the reporting period at $151m, an improvement on Q4 2022’s $49.9m loss. For the full year, adjusted EBITDA stood at a $151m loss (2022: $721.8m loss).

DraftKings noted that “customer-friendly sport outcomes primarily in the final two weeks of November” impacted Q4 revenue and adjusted EBITDA by approximately $175m and $126m, respectively.

The operator’s monthly unique payers in Q4 increased by 37 per cent to 3.5 million, while average revenue per MUP was $116, a six per cent uptick YoY and a 22 per cent increase when adjusted for customer-friendly sport outcomes.

Jason Robins, CEO and Co-Founder of DraftKings, commented: “DraftKings ended 2023 with excellent performance across customer acquisition, retention and engagement as well as structural sportsbook hold percentage despite the worst stretch of sport outcomes we have seen as a public company in the fourth quarter.

“Looking ahead to 2024 and beyond, our focus remains on disciplined execution against our core value drivers, an unwavering commitment to customer centricity, and fulfilling our product roadmap to consistently differentiate ourselves competitively.”

Following its November sportsbook launch in Maine, DraftKings is live with its mobile sports betting in 24 US states and with igaming in five states. The operator also has sportsbook and igaming products live in Ontario, Canada.

DraftKings is also expecting to launch its mobile sports betting offering in North Carolina and Puerto Rico. The operator will go live on March 11 in North Carolina, pending market access, licensure, regulatory approvals and contractual approvals where applicable.

2024 guidance update

Looking ahead, DraftKings has raised its 2024 revenue and adjusted EBITDA guidance previously communicated within its Q3 results in November last year. 

2024 revenue now has a range of $4.65bn to $4.9bn (previously $4.5bn to $4.8bn) which equates to a YoY growth of 27 per cent to 34 per cent. 2024 adjusted EBITDA is now expected to be between $410m and $510m (previously between $350m and $450m).

The new guidance ranges includes all existing jurisdictions and expected launches in North Carolina and Puerto Rico, but excludes the “estimated impact of the company’s proposed acquisition of Jackpocket, which DraftKings will incorporate into its guidance following the close of the proposed acquisition”.

Jason Park, CFO of DraftKings, noted: “In 2023 we delivered on our commitments to generate outstanding revenue growth and drive significant operating efficiencies.

“Based on continued strong underlying fundamentals through the first six weeks of 2024 on top of excellent customer acquisition in the fourth quarter, we are raising the midpoint of our fiscal year 2024 revenue guidance range to $4.775bn from $4.65bn and the midpoint of our fiscal year 2024 Adjusted EBITDA guidance range to $460m from $400m.

“We expect 2024 to mark our first full year of positive adjusted EBITDA, demonstrating clear progress toward the goals we presented at our November 2023 Investor Day.”

Jackpocket acquisition

As previously mentioned, DraftKings has also reached an agreement to acquire the lottery app Jackpocket for a total consideration of approximately $750m.

Approximately 55 per cent ($412.5m) of the transaction will be funded from the company’s balance sheet, while the remaining 45 per cent ($337.5m) will be issued in DraftKings Class A common stock.

“Together with DraftKings, we will be able to bring tremendous value to our customer base as we advance our mission to create a more convenient, fun, and responsible way to take part in the lottery,” said Peter Sullivan, CEO of Jackpocket.

“DraftKings’ broad footprint and exceptional mobile products present an opportunity to meaningfully expand the digital lottery vertical, and we could not be more excited to come together with DraftKings.”

Once completed, DraftKings stated that it expects the Jackpocket acquisition to drive $260m to $340m of revenue and $60m to $100m of adjusted EBITDA in 2026, as well as $350m to $450m of revenue and $100m to $150m of adjusted EBITDA in 2028.

Robins added: “We are very excited to enter the rapidly growing US digital lottery vertical with our acquisition of Jackpocket.

“This transaction will create significant value for DraftKings not only by giving our customers another differentiated product to enjoy but also by improving our overall marketing efficiency similar to how our daily fantasy sports database created an advantage for DraftKings in online sports betting and igaming.”