DraftKings released its financial results for the third quarter of 2024, revealing a mixed picture of growth and challenges. Firstly, the company recorded a significant increase in revenue, surpassing the US$1 billion mark. However, the net loss also grew, indicating that the company still faces obstacles in its quest for profitability.
Revenue growth and loss increase
DraftKings revenue reached $1.1 billion, representing an impressive 39% increase compared to the same period last year. This growth demonstrates the company’s ability to expand its customer base and increase engagement with existing users.
However, the company’s net loss increased by US$12 million compared to the previous year, totaling US$298.6 million. This increase in losses was mainly driven by the growth in expenses in several sectors of the company.
Despite the increase in net loss, there was an improvement in adjusted EBITDA, which went from negative US$153.4 million in the third quarter of 2023 to negative US$58.5 million in the same period of 2024. This reduction in adjusted EBITDA loss suggests that the company is making progress toward profitability, although it is still operating in the red.
Expense analysis
The increase in expenses was a significant factor in the growth in losses. The main increases were observed in the following areas:
- Cost of revenue: Rose by almost US$200 million, reaching US$742.4 million.
- General and administrative costs: Increased 59.2%, reaching US$208.1 million.
- Product and technology costs: Grew 16.4%, reaching US$ 103.6 million.
- Sales and marketing costs: There was a modest increase of 8.5%, totaling US$339.9 million.
These expense increases reflect DraftKings’ continued investments in expansion, product development and customer acquisition.
Draftkings User Metrics
DraftKings saw a significant increase in the number of monthly unique players (MUPs), which grew by 55% to an average of 3.6 million players. However, the acquisition of Jackpocket, a digital lottery app, fueled some of this growth. Excluding Jackpocket, MUP growth was 27%.
Despite the increase in player numbers, average revenue per MUP fell 10% to $103. DraftKings attributed this drop to lower spending by Jackpocket customers compared to its traditional players. When excluding Jackpocket data, average revenue per MUP showed an 8% year-over-year increase.
Expansion and market presence
At the end of the third quarter, DraftKings was operating in 25 states and the District of Columbia, covering 49% of the US population. The company’s iGaming offering was available in five states, with a total of seven states offering legalized iGaming. Additionally, both products were active in Ontario, Canada.
The company also announced expansion plans, including the intention to enter the sports betting market in Missouri following its legalization and launch in Puerto Rico, pending regulatory approval.
Review of financial projections
In response to third quarter results and market conditions, DraftKings has adjusted its financial projections for fiscal 2024:
- The revenue projection was lowered to $4.85 billion – $4.95 billion, down from the previous estimate of $5.05 billion – $5.25 billion.
- The adjusted EBITDA projection was revised to $240 million – $280 million, a reduction from the previous estimate of $340 million – $420 million.
The company attributed this revision primarily to the impact of favorable sports results for customers early in the fourth quarter of 2024, especially during the NFL season.
Future perspectives
Despite the challenges, DraftKings maintains an optimistic outlook for 2025. The company projected revenue between $6.2 billion and $6.6 billion for fiscal 2025, representing an average increase of 30.6% over to 2024 projections.
CEO Jason Robins expressed confidence in the company’s performance, highlighting the strong return of the NFL and college football. He emphasized the company’s focus on driving sustainable revenue growth and profitability in 2025 and beyond.
CFO Alan Ellingson also commented on the results, highlighting efficient customer acquisition, promotional reinvestment and improved sports betting retention. He stated that the company is well positioned to deliver between US$900 million and US$1 billion of adjusted EBITDA in 2025.
In conclusion, while DraftKings continues to show strong revenue growth and user expansion, the company still faces significant challenges in terms of profitability. The adjustment to financial projections for 2024 reflects current market realities, but the company maintains an optimistic outlook for the future, with ambitious projections for 2025.
