Draftkings Shares Tumbled over 14% after Announcing Its Financial Results

DraftKings shares tumbled over 14% after announcing its financial results.

For the three months ended December 31, 2021, DraftKings reported revenue of $473 million, an increase of 47% compared to $322 million during the same period in 2020. Fourth quarter 2021 revenue exceeded the guidance previously provided by the Company during its third quarter earnings conference call on November 5, 2021 by 8%. After giving pro forma effect to the business combination with SBTech (Global) Limited (“SBTech”) and Diamond Eagle Acquisition Corp. which was completed on April 23, 2020, as if it had occurred on January 1, 2019, revenue for the year ended December 31, 2021 grew 101% compared to the year ended December 31, 2020.

“DraftKings’ strong fourth quarter performance exceeded our expectations on the top and bottom line,” said Jason Robins, DraftKings’ co-founder, Chief Executive Officer and Chairman of the Board. “Our excellent quarter capped off a year in which five of our states were Contribution Profit positive, further demonstrating the effectiveness of our state playbook and supporting our positive view of the industry’s TAM. We enter 2022 positioned to grow our market share, further optimize our user experience and continue to strengthen our multi-product suite of offerings.”

Jason Park, DraftKings’ Chief Financial Officer, added, “We grew revenue 47% year-over-year to $473 million in the fourth quarter despite lower-than-expected hold in October primarily due to NFL game outcomes. Our key performance indicators reflected excellent player retention, acquisition and cross-selling in the quarter, as Monthly Unique Payers increased by 32% and Average Revenue Per Monthly Unique Payer grew by 19%. We are increasing the midpoint of our 2022 revenue guidance to $1.93 billion given new state launches and strong underlying performance trends and introducing guidance for Adjusted EBITDA of negative $825 million to $925 million.”

Continued Healthy Growth in Player Retention, Acquisition and Engagement

• Monthly Unique Payers (“MUPs”) for our B2C segment increased 32% compared to the fourth quarter of 2020. On average, 2 million monthly unique paying customers engaged with DraftKings during each month of the fourth quarter. The increase reflects strong unique payer retention and acquisition across our Sportsbook and iGaming product offerings as well as the expansion of our Sportsbook and iGaming product offerings into new states.
• Average Revenue per MUP (“ARPMUP”) was $77 in the fourth quarter of 2021 representing a 19% increase versus the same period in 2020. Our ARPMUP benefitted from continued mix shift into our Sportsbook and iGaming product offerings and cross selling our customers into more products.

Increasing Midpoint of 2022 Revenue Guidance and Introducing 2022 Adjusted EBITDA Guidance

• DraftKings is raising its fiscal year 2022 revenue guidance from a range of $1.7 billion to $1.9 billion to a range of $1.85 billion to $2.0 billion which equates to year-over-year growth of 43% to 54% and a 7% increase compared to the midpoint of our previous revenue guidance.
• DraftKings is also introducing fiscal year 2022 Adjusted EBITDA guidance. The Company expects its Adjusted EBITDA loss in 2022 to be between $825 million and $925 million.
• DraftKings’ 2022 revenue and Adjusted EBITDA guidance reflects the launch of mobile sports betting in New York and Louisiana in January of 2022 and our demonstrated ability to engage users and acquire customers efficiently. The guidance does not include the impact of any new state launches after February 18th, 2022.
• DraftKings expects to be Contribution Profit positive for fiscal year 2022 across all states where we are currently live including New York and Louisiana.
• In addition, assuming we had not launched any additional states after December 31, 2021, we expect that we would have generated positive Adjusted EBITDA in the fourth quarter of 2022.
• Based on all of the states where DraftKings is currently live and if legalization trends remain consistent with prior years (which has been approximately 7% to 9% mobile sports betting legalization per year and 3% to 4% iGaming legalization per year), the Company would expect to generate positive Adjusted EBITDA in the fourth quarter of 2023.
• Detailed financial data and other information is available in DraftKings’ Annual Report on Form 10-K, which will be filed with the Securities and Exchange Commission (the “SEC”), as well as in a slide presentation that can be accessed through the “Investors” section of the Company’s website atinvestors.draftkings.com.

Expanded Mobile Sports Betting and iGaming Footprint

• Following successful launches in New York and Louisiana, DraftKings is now live with mobile sports betting in 17 states that collectively represent approximately 36% of the U.S. population.
• DraftKings is also live with iGaming in 5 states, representing approximately 11% of the U.S. population.
• In 2022, 10 state legislatures have introduced legislation to legalize mobile sports betting and 8 state legislatures have introduced legislation either to expand their existing sports betting frameworks, create referendums regarding sports betting legislation or to increase in-person sports betting opportunities. In addition, 3 states have introduced iGaming legislation and 3 states have introduced online poker legislation.
• Three of the U.S. jurisdictions where DraftKings has the potential opportunity to participate via a market access agreement or direct license – Maryland, Puerto Rico and Ohio - have authorized mobile sports betting. These three jurisdictions represent approximately 7% of the U.S. population and bring the percentage of the population where DraftKings expects to offer legalized mobile sports betting to approximately 43%.

Product Expansion and Innovation and Rewards Program

• In the fourth quarter, DraftKings launched parlay and same game parlay insurance promotion capabilities, allowing bettors to win something even if they lose legs within their parlay bet, while supporting growth in the Company’s mix of mobile sports betting handle coming from parlays.
• In November, the Company launched college basketball and NHL same game parlays, expanding the offering beyond the NFL, college football and the NBA.
• We also invested in our in-play offering and in-play experience by introducing a new front-end user interface for Flash Bet, an immersive live betting experience where users can follow what’s happening in-game and access “flash” markets, which refer to the next occurrence that will happen in a game. Markets supported by this functionality include Next Play Result, Drive Result and Drive Yardage for the NFL and Next Team to Score and Type of Score for the NBA.
• DraftKings Social, an industry-first innovation to create an integrated social community that allows fans to interact with each other within a peer-to-peer environment, is now live across our Sportsbook and DFS apps and helping to drive further customer engagement.
• In November, DraftKings launched its most comprehensive loyalty program, Dynasty Rewards, which is available across all DraftKings consumer products, in all jurisdictions, and includes exclusive opportunities brought about by strategic league and partner deals.