DraftKings Earnings Release Highlighted By Jackpocket Acquisition

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DraftKings stock bounced back Friday after a hit taking from Q4 earnings that fell short of expectations despite robust year-over-year growth, although it gave back some gains amid a broader market pullback Tuesday.

The stock closed at $44.57 Friday, although it is down 7% as of 3 pm ET Tuesday. The Friday close was up 0.25% from Thursday‘s close after hitting as low as $41.76 after DraftKings dropped its earnings release Thursday evening.

It came after CEO Jason Robins, on Friday morning, highlighted user growth and the acquisition of online lottery Jackpocket, while attributing some shortcomings to bad luck.

DraftKings says revenue miss unlucky

DraftKings posted $1.23 billion in revenue, a 44% increase from Q4 2022. However, that is about 2% shy of Wall Street estimates.

It closed the quarter with $151 million in adjusted EBITDA, trailing estimates by 19%. The company primarily attributed that missing $126 million from customer-friendly sports outcomes in the last two weeks of November. Still, it is a large turnaround from Q4 2022, when there was an adjusted EBITDA loss of $49.9 million.

“As you are well aware of by now, sport outcomes were very customer friendly in the fourth quarter, primarily in the final two weeks of November, while December was consistent with expectations,” Robins said.

The company reported adjusted earnings of 29 cents a share for the quarter, up from projections of 8 cents per share.

Crown hits Jackpocket for $750M

DraftKings announced a $750 million agreement to buy Jackpocket, a leading online lottery app. DraftKings stock will be used to front roughly 45% of that price tag.

Robins touted the acquisition as a tool DraftKings can use to reach more users and build loyalty in states where DraftKings is not live with online sports betting or iGaming, not unlike it has with daily fantasy sports.

“[There is] lots of reason to believe that not only is there cheap acquisition, but there’s also high (long-term value) customers that we can cross over. And I think that’s a really core thing that DFS provided for us as an advantage too. So if you look at kind of the playbook that’s worked for us, entering new states, having a built-up database, having an active base of customers that we can cross-sell. I think this is doubling down on that,” Robins said.

Jackpocket live in key non-sports betting markets

States where DraftKings does not offer sports betting but Jackpocket is live include:

DraftKings expects Jackpocket to add adjusted EBITDA of between $60 million and $100 million in 2026, and between $100 million and $150 million in 2028.

Adding to DraftKings stock pile

Jackpocket stands out as the leading US operator in offering draw-based digital lottery tickets at a larger scale. Those tickets account for roughly 30% of the $100 billion lottery market, according to Citizens JMP Securities. The company generated $78 million in revenue through 2023.

The move follows a wave of DraftKings commercial partnerships, including a recent marketing deal with Barstool Sportsbook and acquisitions like VSiN and Golden Nugget Online Gaming aimed at expanding market reach and offerings.

Robins briefly addressed the Barstool partnership, describing it as “a partner that we know very well and I have a ton of data on.”

Monthly users hit new high

Monthly unique players reached an annual high of 3.5 million during the quarter, a 37% increase year-over-year.

Meanwhile, average revenue per monthly unique player was up 7% year-over-year, though less than in previous quarters.

Sportsbook hold was 9.2% for the quarter, even with the bad November stretch.

Weathering bad Super Bowl game outcome

DraftKings Super Bowl results will be reported next quarter, but Robins provided some early insight during the call. He credited same-game parlays and popular props markets with keeping hold at expected levels despite “an unfavorable game outcome.”

DraftKings was on the losing side of three major markets. The public had:

“We ended up actually holding right in line with what we thought we would from a hold rate perspective,” Robins said. “So that was really, I think, a testament to the great work the team has done over the last few years to drive more diversified bets and more parlays.”

DraftKings raises 2024 guidance

DraftKings revised its annual adjusted EBITDA guidance, now forecasting a range of $410 million to $510 million, up from its earlier projection of $350 million to $450 million.

That does not account for new online sports betting or iGaming states. It does, however, account for states it will add with Jackpocket, like Texas, one of the largest markets in the country. Highlighting existing markets like New York, Robins outlined the potential for significant revenue growth in key states where DraftKings already operates.

New York was among several states that were profitable for the quarter. That growth helped the company rebound from a challenging 2022 to end 2023 with DraftKings stock up 148% over the past year.

“Jackpocket has a casino, so there’s a lot to do there, I think, with their brand, and we’ll see how that all evolves over time … New York is a huge state for them,” Robins said.