DraftKings saw its stock fall in after-hours trading Thursday after it cut guidance on customer-friendly results.
There have been just five NFL betting Sundays in the fourth quarter, which began Oct. 1. A run of wins by the favorites, though, led DraftKings to cut its adjusted EBITDA guidance for the full year by nearly 32% at the midpoint.
The earnings report also included growth in several key performance indicators including average customers and their average revenue. It also reiterated adjusted EBITDA guidance for next year at $900 million to $1 billion, which does not include recently legalized Missouri.
DKNG was down nearly 5% in early trading at 8 a.m. Eastern Friday.
DraftKings sacked by NFL results
The customer-friendly NFL results led to a $175 million reduction in annual adjusted EBITDA guidance. DraftKings also lowered revenue guidance by $250 million.
Lower promo costs and more efficient marketing helped offset the adjusted EBITDA hit by nearly a third with a $55 million boost, according to a shareholder letter from CEO Jason Robins.
The company improved how it weeds out customers with lower lifetime values. Customers from “high tax states,” meaning the four that could have faced a bet surcharge, were under the microscope a bit closer.
“We have made significant progress identifying customers with lower lifetime values, especially in high tax states, and are improving our expectation for promotions for the remainder of fiscal year 2024 accordingly,” Robins said.
NFL parlay handle up
Compounding the issue of favorites winning is that NFL parlay handle as a percentage of total handle is 5 percentage points higher than last season.
The growth is positive long-term, though. Parlays hold more than straight bets, which leads to a higher structural sportsbook hold.
Positives from Q3
DraftKings continued to acquire more customers while the cost to do so continued to fall, Robins said in the letter.
The company grew sports betting and online casino customers 14% compared to last year while paying nearly 20% less to bring them on.
Monthly unique players jumped 55% to 3.6 million, though about half of that growth can be attributed to the Jackpocket acquisition, according to the quarterly report. Those players increased 27% on a same-store basis.
Average revenue for each monthly unique customer was $103, down 10% from last year, though that too was impacted by Jackpocket. Stripping Jackpocket out, iGaming and sports betting average revenue grew 8%.
Sportsbook product improved
DraftKings added new features to a product its main competitor, FanDuel, does well in: NBA betting.
Exclusive markets were added to drive engagement with customers through key game storylines. There are also more than 50 new NBA markets available for same-game parlays.
Robins also noted improved features and functionality concerning live betting.
DraftKings to split revenue reporting
There will be a breakdown of net revenue between DraftKings online casino and sports betting in early 2025.
“We expect these anticipated new disclosures will facilitate improved understanding of our underlying revenue trends,” Robins said.
Online sportsbook gross revenue grew 39%, while iGaming gross revenue improved 26% compared to last year.
