DraftKings posts mixed Q4 results; Shares bounce back from initial decline

DraftKings (DKNG), a leading sports betting and gaming company, reported its financial results for the fourth quarter of 2023. The company's performance was mixed, with revenue and average revenue per monthly unique payer (ARPMUP) increasing significantly but falling short of expectations. The company also issued in-line guidance for FY24 and announced its intention to acquire Jackpocket, a leading lottery app in the United States.

Shares of DKNG slipped 10% in reaction to the news and threatened to test the 20-sma ($41), However, the stock was able to reverse its early losses and bounce back with the broader market to end the day near breakeven. 

Key Financial Highlights

* DraftKings reported revenue of $1.23 billion in Q4 2023, representing a 44% increase year-over-year. 

* Adjusted EBITDA was $151 million in Q4 2023, compared to a loss of $49.9 million in the same period in 2022

* DraftKings reported 3.5 million average monthly unique paying customers in Q4 2023, representing an increase of 37% compared to the same period in 2022 

* DraftKings' ARPMUP was $116 in Q4 2023, representing a 6% increase compared to the same period in 2022.  

DraftKings reported a strong increase of 43.9% year-over-year, reaching $1.23 billion. However, this fell slightly below the $1.24 billion consensus estimate. 

Adjusted earnings per share (EPS) for the quarter came in at $0.29, surpassing expectations of $0.08 per share. This indicates that DraftKings was able to effectively manage its expenses and achieve profitability, marking a positive outcome for the quarter. 

One of the key factors contributing to DraftKings' revenue growth was its increase in Monthly Unique Payers (MUPs). In Q4 2023, the company reported a significant 37% increase in MUPs compared to the same period in 2022, with an average of 3.5 million unique paying customers per month. This growth in customer base DraftKings' ability to attract and retain users, contributing to its revenue generation. 

Furthermore, the Average Revenue per MUP (ARPMUP) experienced a modest 6% increase, reaching $116 in the fourth quarter. This suggests that DraftKings was able to generate higher revenue from each paying customer, potentially indicating increased user engagement with the platform or successful cross-selling efforts. Looking ahead, DraftKings provided its guidance for the fiscal year 2024.

DraftKings also announced that it has reached an agreement to acquire Jackpocket, the leading lottery app in the United States, for a total consideration of approximately $750 million. This acquisition will strengthen DraftKings' position in the sports betting and gaming market by expanding its product offerings and increasing its customer base.

The company also issued its guidance for FY24, with revenue expected to be in the range of $4.65 billion to $4.90 billion. This figure is in line with analysts' expectations, with a consensus of $4.67 billion. DraftKings also raised the midpoint of its FY24 revenue guidance range to $4.775 billion from $4.65 billion.

The company's adjusted EBITDA guidance for FY24 has also been raised, with DraftKings now expecting adjusted EBITDA to be between $410 million and $510 million. This represents an increase from its prior FY24 adjusted EBITDA guidance of between $350 million and $450 million.

Conclusion

DraftKings' Q4 earnings report demonstrates the company's continued growth in the sports betting and gaming market. The company's strong performance was driven by its ability to increase its customer base and revenue per user. DraftKings' acquisition of Jackpocket is expected to further strengthen its position in the market by expanding its product offerings and increasing its customer base. The company's FY24 guidance indicates that it expects to continue its growth trajectory, with revenue and adjusted EBITDA expected to increase significantly.