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01/10 16:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
DraftKings' earnings call presented a mixed outlook. While there were positive elements such as AI-driven cost optimization and growth in live betting, concerns about tax impacts and unclear guidance on prediction markets and AI revenue effects tempered enthusiasm. The Q&A revealed management's cautious approach and uncertainty in some areas, leading to a neutral sentiment for short-term stock movement.
Revenue Revenue increased 37% year-over-year to $1.513 billion. The increase was driven by strong growth in Sportsbook and iGaming net revenue, as well as Sportsbook-friendly outcomes in May and June, which added $110 million to revenue.
Adjusted EBITDA Adjusted EBITDA was $301 million, representing a 20% adjusted EBITDA margin. This was double the prior record, driven by higher Sportsbook hold percentage, improved promotional efficiency, and cost discipline.
Sportsbook Net Revenue Sportsbook net revenue increased 45% year-over-year, exceeding expectations. This was due to a 230 basis point increase in net revenue margins and a 100 basis point increase in structural Sportsbook hold percentage to 10.9%, along with Sportsbook-friendly outcomes.
Sportsbook Handle Sportsbook handle increased 6% year-over-year to approximately $11.5 billion. Live betting handle increased 16% year-over-year, driven by innovation and leadership in the live betting category.
iGaming Net Revenue iGaming net revenue increased 23% year-over-year, driven by strong growth in active iGaming customers and increased engagement with jackpots, which saw gross gaming revenue increase over 100% year-over-year.
Adjusted Gross Margin Adjusted gross margin increased to 48%, up more than 400 basis points year-over-year. This was due to higher Sportsbook hold percentage and improved promotional efficiency across product offerings.
Sportsbook product innovation: DraftKings continues to innovate its #1 rated Sportsbook product, focusing on live betting, flexible merchandising, and social features to enhance user engagement.
iGaming growth: iGaming net revenue increased 23% year-over-year, driven by strong growth in active iGaming customers and increased engagement with jackpots.
New state launch: DraftKings is preparing for a mobile Sportsbook launch in Missouri later this year, which is included in the fiscal year 2025 guidance.
Market expansion opportunities: The company is exploring federally regulated prediction markets to enhance shareholder value.
Revenue growth: Revenue increased 37% year-over-year to $1.513 billion in Q2 2025, with adjusted EBITDA reaching $301 million, a 20% margin.
Efficiency improvements: Promotional reinvestment as a percentage of gross gaming revenue improved by nearly 600 basis points year-over-year, and adjusted gross margin increased to 48%.
AI and technology utilization: DraftKings is leveraging artificial intelligence and other technologies to improve operational efficiency.
Capital allocation: The company repurchased 6.5 million shares in the first two quarters of 2025 and continues to invest in organic growth initiatives.
Profitability focus: DraftKings is targeting a 30% adjusted EBITDA margin over time, supported by cost discipline and efficiency initiatives.
Regulatory Changes: The company anticipates higher tax rates in New Jersey, Louisiana, and Illinois, which could impact financial performance.
Market Expansion Challenges: The anticipated launch of mobile sports betting in Missouri is expected to absorb financial resources, potentially impacting profitability.
Dependence on Sportsbook Outcomes: Sportsbook outcomes, which can vary, significantly impact revenue. While outcomes were favorable in Q2, normalization over time could reduce revenue.
Promotional Efficiency: While promotional reinvestment has improved, continued optimization is necessary to maintain margins and customer acquisition efficiency.
Technological Adaptation: The company is leveraging AI and new technologies, but the effectiveness and scalability of these initiatives remain to be seen.
Fiscal Year 2025 Revenue Guidance: DraftKings is maintaining its fiscal year 2025 revenue guidance of $6.2 billion to $6.4 billion, with expectations to achieve revenue closer to the high end of this range due to strong Sportsbook-friendly outcomes and core value drivers.
Adjusted EBITDA Guidance: The company is maintaining its fiscal year 2025 adjusted EBITDA guidance of $800 million to $900 million, with expectations to deliver adjusted EBITDA near the midpoint of this range. This includes anticipated financial impacts from the mobile Sportsbook launch in Missouri and higher tax rates in New Jersey, Louisiana, and Illinois.
Sportsbook Net Revenue Margin: DraftKings now expects its Sportsbook net revenue margin to exceed 7.5% for fiscal year 2025, an increase from the previously guided range of 7% to 7.5%.
Adjusted Gross Margin: The company continues to expect an adjusted gross margin of 46% for fiscal year 2025, representing an increase of more than 300 basis points year-over-year compared to fiscal year 2024.
Free Cash Flow: DraftKings continues to expect free cash flow of approximately $750 million in fiscal year 2025.
Mobile Sportsbook Launch in Missouri: The fiscal year 2025 guidance includes anticipated financial impacts from the launch of mobile sports betting in Missouri later this year.
Tax Rate Impacts: The guidance also includes anticipated financial impacts from higher tax rates in New Jersey, Louisiana, and Illinois.
Predictions Market Offering: The fiscal year 2025 guidance does not include potential financial impacts from the launch of a predictions market offering.
Share Repurchase Program: In the first two quarters of this year, DraftKings repurchased 6.5 million shares through its stock repurchase program while continuing to invest in organic growth initiatives.
The earnings call indicates a positive outlook for DraftKings with maintained guidance for fiscal year 2025, optimistic revenue and EBITDA projections, and a strong Sportsbook net revenue margin. The Q&A section highlights management's strategic initiatives, including the ESPN partnership and prediction markets, which are seen positively. The lack of clarity on some financial impacts slightly tempers enthusiasm, but overall, the strategic direction and partnerships are likely to drive a positive stock reaction.
DraftKings' earnings call presented a mixed outlook. While there were positive elements such as AI-driven cost optimization and growth in live betting, concerns about tax impacts and unclear guidance on prediction markets and AI revenue effects tempered enthusiasm. The Q&A revealed management's cautious approach and uncertainty in some areas, leading to a neutral sentiment for short-term stock movement.
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