DraftKings shares fell as much as 7% in late trading after the gaming company revised its fiscal 2024 estimates downwards due largely to NFL game outcomes that favored the public. Those results created a $250 million revenue headwind, according to the company’s CEO.
For the quarter that ended Sept. 30, DraftKings reported revenue of $1.1 billion, matching consensus estimates of $1.1 billion, per Yahoo Finance data. Losses per share of $0.60 were below average estimates of $0.42. Shares in after-hour trading quickly fell 7%.
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The company also introduced fiscal 2025 revenue guidance for the first time. DraftKings said it projects next year’s revenue to be in the range of $6.2 to $6.6 billion, topping consensus estimates of about $5.86 billion.
Perhaps most notably, however, the company made a series of downward revisions to its fiscal 2024 revenue and EBITDA estimates. Those changes, CEO Jason Robins said in a letter to shareholders, were largely due to NFL games that broke against the sportsbook. These are typically games won by the favorite, as the public tends to put more money behind better teams. This quarter and the fourth quarter contain the bulk of the NFL season, which draws the most bets—and the most volatility—among the major U.S. leagues.
“NFL outcomes were very customer-friendly early in the fourth quarter,” Robins wrote. “Customer-friendly sport outcomes resulted in headwinds of $250 million and $175 million to our fiscal year 2024 revenue and adjusted EBITDA guidance, respectively.”
The company’s monthly average users for the quarter were 3.6 million, up 57% from 2023 (2.3 million) and more than double the number from 2022 (1.6 million). The average revenue per monthly user fell to $103, down 10% from 2023 ($114) and up 3% from 2022 ($100).
The company’s marketing spend also jumped slightly for the second straight quarter. Sales and marketing costs in the third quarter were $340 million, up about 9% from the same quarter last year ($313.3 million). Those costs are closely watched by investors, because they play a big role in determining how expensive it is to acquire new customers.
Robins said in his letter that customer acquisition costs declined “nearly 20%” in the quarter, and that DraftKings is improving its expectations for promotions over the rest of the fiscal year.
“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,” he said. “We are also continuing to drive expense efficiency throughout the organization as we balance growth and profitability. Promotional optimization and expense efficiency initiatives account for a $55 million improvement in our fiscal year 2024 Adjusted EBITDA.”
