DraftKings Raises Fiscal Year Outlook Amid $750 Million Lottery App Acquisition
DraftKings Inc. (NASDAQ: DKNG) released its fourth-quarter earnings report Thursday after the close of markets, showcasing a mixed bag of financial performance but an optimistic outlook for the future. The Boston-based company reported adjusted earnings of 29 cents per share, a notable improvement from the loss of 14 cents per share in the same period last year.
While revenue growth remained robust, reaching a record $1.23 billion, it fell slightly below FactSet’s projected $1.24 billion. However, the company remains confident in its trajectory, citing continued customer engagement, new customer acquisitions, and product expansion as drivers of revenue growth.
One notable highlight from DraftKings’ report is the significant increase in Monthly Unique Players (MUPs), which surged by 37% to an average of 3.5 million paying customers, particularly as its sportsbook and iGaming offerings expand to additional jurisdictions.
Despite a 6% increase in average revenue per MUP to $116, DraftKings faced challenges due to customer-friendly sport outcomes, which offset potential revenue gains. Adjusting for these outcomes, the average revenue per MUP would have seen a substantial 22% increase.
DraftKings continues to expand its market reach, with live mobile sports betting now available in 24 states, covering 46% of the U.S. population. Additionally, its iGaming offerings are operational in five states, representing 11% of the U.S. population.
The company’s ambitious growth plans are further evidenced by its upward revision of fiscal year 2024 revenue outlook, now projected between $4.65 billion to $4.9 billion, an increase from the prior $4.50 billion to $4.80 billion estimate provided for 2024 in November. This revision is coupled with an adjusted EBITDA guidance increase to $410 million to $510 million.
The Jackpocket acquisition
In a strategic move to bolster its portfolio, DraftKings announced the acquisition of Jackpocket, the leading lottery app in the U.S., for $750 million. This acquisition, expected to be finalized in the second half of 2024 pending regulatory approvals, is anticipated to provide $260 to $340 million in revenue in fiscal year 2026, along with $60 to $100 million of incremental adjusted EBITDA.
The acquisition is expected to be paid via a mix of cash and common shares, with cash expected to account for 55% of the transaction. The company has indicated that no capital raise is required to fund the cash commitment.
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