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Core Viewpoint - Needham analyst Bernie McTernan maintains a Buy rating on DraftKings Inc. with a price forecast of $65 despite the company missing revenue and earnings estimates for the first quarter [1] Financial Performance - DraftKings reported first-quarter revenue of $1.41 billion, missing the Street consensus estimate of $1.44 billion [1] - The company reported earnings per share of 12 cents, which also fell short of the Street consensus estimate of 22 cents per share [1] Guidance Revision - The company lowered its full-year revenue guidance from a range of $6.3 billion to $6.6 billion to a new range of $6.2 billion to $6.4 billion [2] - Full-year adjusted EBITDA guidance was cut from $900 million to $1.0 billion to a new range of $800 million to $900 million [3] Factors Affecting Performance - Unfavorable sports outcomes negatively impacted the company's first-quarter results, leading to the downward revision of full-year 2025 revenue and adjusted EBITDA guidance [3] - Despite the challenges, the company highlighted strong underlying trends driven by a higher structural hold and efficient use of promotional spending [4] Market Sentiment and Growth - The reported 16% growth in online sports betting handle is expected to improve sentiment on DraftKings shares, especially compared to Flutter Entertainment's 8% growth [5] - Ongoing product enhancements, particularly in in-play betting, are likely contributing to DraftKings' outperformance in handle growth [5] Stock Performance - DraftKings shares increased by 3.46% to $36.57 as of the last check on Friday [6]

Core Insights - DraftKings' Q1 2025 earnings were affected by a high win rate for favored teams during March Madness, impacting sportsbook margins, yet revenue increased by 20% year-over-year to $1.41 billion [1][4] - The company is focusing on AI and unique betting features to enhance product offerings and customer experience, positioning itself as an innovator in the industry [1][6] Financial Performance - Q1 revenue reached $1.41 billion, a 20% increase from $1.18 billion in Q1 2024 [4] - DraftKings lowered its full-year 2025 revenue guidance to between $6.2 billion and $6.4 billion, down from $6.3 billion to $6.6 billion [8] - Adjusted EBITDA guidance was revised to between $800 million and $900 million, reduced from $900 million to $1 billion [8] Customer Metrics - Monthly unique payers increased to an average of 4.3 million in Q1, reflecting a 28% year-over-year growth [11] - Strong customer retention and acquisition were noted, aided by the acquisition of Jackpocket [11] Strategic Initiatives - The company is investing in AI to drive operational efficiency and enhance customer support [6] - Recent product enhancements, including micro-betting features and proprietary jackpots, have differentiated DraftKings in a competitive market [5][7] Market Context - The high win rate of favored teams during March Madness resulted in a record 82% win rate for high seeds, which negatively impacted DraftKings' sportsbook margins [3][10] - The company believes that the recent volatility in outcomes is random and not indicative of structural issues [2][10]

Financial Data and Key Metrics Changes - The company generated $1,409,000,000 in revenue for Q1 2025, representing a 20% year-over-year growth [12] - Adjusted EBITDA for the same period was $103,000,000 [12] - The company revised its fiscal year 2025 revenue guidance to $6,200,000,000 to $6,400,000, down from the previous guidance of $6,300,000,000 to $6,600,000, due to customer-friendly outcomes in March [14] - Adjusted gross margin increased to 45%, up more than 100 basis points year-over-year [14] Business Line Data and Key Metrics Changes - Sportsbook handle increased 16% year-over-year to $13,900,000,000, consistent with expectations [13] - Structural sportsbook hold percentage improved to 10.4%, an increase of 60 basis points year-over-year [13] - Actual sportsbook hold percentage was 9.5%, impacted by customer-friendly outcomes during the NCAA basketball tournament [13] Market Data and Key Metrics Changes - The company noted that online gaming remained resilient in mature jurisdictions during economic downturns, with strong customer metrics consistent with forecasted trends [10] - The company experienced a headwind of $170,000,000 to revenue and $111,000,000 to adjusted EBITDA due to customer-friendly outcomes year-to-date [15] Company Strategy and Development Direction - The company is focused on enhancing product offerings and optimizing promotional deployment to drive higher structural sportsbook hold percentages [7] - The management emphasized the importance of M&A as part of an overall strategy to create shareholder value, citing past acquisitions that have yielded positive results [21] - The company is exploring international expansion opportunities but remains focused on growth within the U.S. market [67] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that recent volatility in sports outcomes is random and not indicative of a fundamental change in the market [24] - The company expects to generate free cash flow of about $750,000,000 in fiscal year 2025 [17] - Management remains optimistic about the rest of 2025, highlighting strong customer engagement and product improvements [121] Other Important Information - The company completed Q1 with $1,100,000,000 in cash after repurchasing shares [10] - Promotional reinvestment as a percentage of gross gaming revenues was more efficient year-over-year [14] Q&A Session Summary Question: Thoughts on M&A boundaries and strategy - Management views M&A as part of an overall evaluation for shareholder value creation, citing successful past acquisitions [21] Question: Concerns over structural hold versus actual hold - Management is confident that structural hold and actual hold will converge over time, despite recent unfavorable outcomes [24] Question: Handle growth trends and expectations - Management noted a slight slowdown in handle growth in April but expects high single digits to low double-digit growth moving forward [31] Question: iGaming growth rates and promotional strategies - Management believes iGaming growth should be higher, with significant improvements made in product and marketing leading to accelerated growth [34] Question: Market share in basketball and live betting performance - Management indicated that they gained market share in basketball, driven by significant growth in live betting options [45] Question: Advertising spend and efficiency - Management noted softening in digital advertising costs, allowing for potential increased spending in that area [79] Question: Capital allocation and share repurchases - Management confirmed a commitment to a $1,000,000,000 buyback program, having repurchased $140,000,000 in Q1 [108]

Financial Data and Key Metrics Changes - The company generated $1,409 million in revenue for Q1 2025, representing a 20% year-over-year growth [10] - Adjusted EBITDA for the same period was $103 million [10] - Revenue guidance for FY 2025 has been revised to $6,200 million to $6,400 million, and adjusted EBITDA guidance to $800 million to $900 million [12] Business Line Data and Key Metrics Changes - Sportsbook handle increased by 16% year-over-year to $13,900 million, consistent with expectations [11] - Structural sportsbook hold percentage improved to 10.4%, up 60 basis points year-over-year [11] - Promotional reinvestment as a percentage of gross gaming revenues became more efficient year-over-year, contributing to an adjusted gross margin increase of over 100 basis points to 45% [12] Market Data and Key Metrics Changes - Customer-friendly sports outcomes negatively impacted revenue by $170 million and adjusted EBITDA by $111 million year-to-date [13] - Handle growth in the NCAA tournaments was significant, with higher seeds winning at an 82% rate, the highest in history [6] Company Strategy and Development Direction - The company is focused on enhancing product offerings and optimizing promotional strategies to improve structural hold and efficiency [5][10] - There is a strong emphasis on live betting, which has seen significant growth, contributing to overall handle increases [54] - The company is exploring M&A opportunities selectively, focusing on creating shareholder value [19][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of online gaming during economic downturns, citing strong customer metrics [7] - The company anticipates continued growth in handle and structural hold, with expectations for Q2 revenues to increase approximately 25% year-over-year [15] - Management acknowledged the impact of customer-friendly outcomes but remains optimistic about future performance normalizing [22] Other Important Information - The company completed Q1 with $1,100 million in cash after repurchasing shares [7] - There is a focus on leveraging AI across the organization to improve efficiency and customer service [40][94] Q&A Session Summary Question: M&A Strategy - Management views M&A as part of an overall strategy to create shareholder value, with recent acquisitions yielding positive results [19] Question: Structural Hold vs. Actual Hold - Management is confident that recent unfavorable outcomes are random and that structural hold and actual hold will converge over time [22] Question: Handle Growth Trends - There has been a slight deceleration in handle growth moving into April, but overall growth remains strong [30] Question: iGaming Growth Rates - Management expects iGaming growth to accelerate, with April showing a year-over-year growth of 26% [33] Question: Live Betting Dynamics - Live betting has become a significant portion of total handle, with expectations for continued growth [53] Question: Advertising Spend Efficiency - The company is seeing efficiencies in digital advertising spend, which may allow for increased investment in that area [78] Question: International Expansion Plans - While international expansion is not a current necessity, management is open to opportunities that align with their growth strategy [68] Question: Jackpocket Integration - The company is actively working on integrating Jackpocket into its platform, with expectations for profitability despite market challenges [116]

Financial Performance - Revenue for the three months ended March 31, 2025, increased by $233.8 million, or 19.9%, to $1,408.8 million compared to $1,175.0 million for the same period in 2024[200] - Net loss for the three months ended March 31, 2025, improved to $(33.9) million from $(142.6) million in the same period in 2024[199] - Adjusted EBITDA for the three months ended March 31, 2025, was $102.6 million, a significant increase from $22.4 million in the same period in 2024[199] - Adjusted Earnings Per Share for the three months ended March 31, 2025, improved to $0.12 from $0.03 in the same period in 2024[200] - Adjusted Earnings Per Share for the three months ended March 31, 2025, was $0.12, compared to $0.03 for the same period in 2024[222] - Net loss decreased by $108.7 million to $33.9 million for the three months ended March 31, 2025, compared to a net loss of $142.6 million for the same period in 2024[233] Revenue Breakdown - Sportsbook Handle increased by $1,879.0 million, or 15.7%, to $13,880.4 million for the three months ended March 31, 2025, from $12,001.4 million in the same period in 2024[212] - Sportsbook Net Revenue Margin increased by 0.3 percentage points to 6.4% for the three months ended March 31, 2025, compared to 6.1% in the same period in 2024[213] - iGaming revenue increased by $53.5 million, or 14.5%, to $423.5 million for the three months ended March 31, 2025, from $370.0 million in the same period in 2024[214] - Other revenue increased by $32.4 million, or 46%, to $103.4 million for the three months ended March 31, 2025, primarily due to the inclusion of revenue from Jackpocket[215] Costs and Expenses - Cost of revenue increased by $133.7 million, or 18.8%, to $843.8 million for the three months ended March 31, 2025, from $710.1 million in the same period of 2024[225] - Cost of revenue as a percentage of revenue decreased by 0.5 percentage points to 59.9% for the three months ended March 31, 2025, compared to 60.4% for the same period in 2024[226] - Sales and marketing expense increased by $3.0 million, or 0.9%, to $343.7 million for the three months ended March 31, 2025, from $340.7 million in the same period of 2024[227] - General and administrative expense decreased by $9.9 million, or 5.7%, to $164.4 million for the three months ended March 31, 2025, from $174.3 million in the same period of 2024[229] Cash Flow and Liquidity - Cash and cash equivalents as of March 31, 2025, were $1,119.7 million, sufficient to meet current working capital and capital expenditure requirements for at least twelve months[234] - Net cash used in operating activities was $119.0 million for the three months ended March 31, 2025, compared to $70.4 million in the same period of 2024[240] - Net cash used in investing activities was $39.0 million for the three months ended March 31, 2025, a slight decrease from $39.2 million in the prior year[241] - Net cash provided by financing activities increased to $372.8 million for the three months ended March 31, 2025, compared to $30.6 million used in the same period of 2024[242] - The company had cash and cash equivalents of $1,544.981 million at the end of the period, up from $1,483.257 million at the end of the previous year[240] Debt and Financing - The company entered into a senior secured revolving credit facility of up to $500.0 million, with $490.0 million available for borrowing as of March 31, 2025[236] - A new class of incremental term loans was established under the credit agreement, totaling $600.0 million, with principal payments of 1.00% per annum required[237] - As of March 31, 2025, the company had $839.9 million in non-cancelable purchase obligations, with $317.8 million payable in the remainder of 2025[238] - The stock repurchase program authorized up to $1.0 billion, with 3.7 million shares repurchased for $142.3 million during the three months ended March 31, 2025[239] Market and Risk - The company expects to achieve profitability on a consolidated Adjusted EBITDA basis as total contribution profit exceeds fixed costs, influenced by the percentage of the U.S. adult population with access to its product offerings[198] - There were no significant changes in market risk exposure during the three months ended March 31, 2025[246] - No changes were made to critical accounting estimates during the three months ended March 31, 2025[245]

[First Quarter 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) DraftKings reported a **20% year-over-year revenue increase to $1.41 billion** for Q1 2025, driven by customer engagement and the Jackpocket acquisition, with **3.7 million shares repurchased** Revenue Performance | Metric | Q1 2025 | Q1 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,409 million | $1,175 million | +$234 million | +20% | - Key growth drivers included healthy customer engagement, efficient customer acquisition, higher structural Sportsbook hold, and the acquisition of Jackpocket[3](index=3&type=chunk) - The CEO noted that without customer-friendly sports outcomes in March, the company would have raised its fiscal year 2025 guidance[4](index=4&type=chunk) - The company repurchased **3.7 million shares** in the first quarter under its existing stock repurchase program[4](index=4&type=chunk) [Fiscal Year 2025 Guidance](index=1&type=section&id=Fiscal%20Year%202025%20Guidance) The company revised its fiscal year 2025 guidance downwards, projecting revenue between **$6.2 billion and $6.4 billion** and Adjusted EBITDA between **$800 million and $900 million**, excluding Missouri launch impact Revised Fiscal Year 2025 Guidance | Guidance Metric | Previous FY2025 Guidance | Revised FY2025 Guidance | | :--- | :--- | :--- | | Revenue | $6.3B - $6.6B | $6.2B - $6.4B | | Adjusted EBITDA | $900M - $1.0B | $800M - $900M | - The revised revenue guidance equates to approximately **32% year-over-year growth** at the midpoint[8](index=8&type=chunk) - The current guidance for fiscal year 2025 does not include the impact of a potential mobile sports betting launch in Missouri[8](index=8&type=chunk) [Operational Metrics and Market Footprint](index=1&type=section&id=Operational%20Metrics%20and%20Market%20Footprint) Monthly Unique Payers (MUPs) grew **28% to 4.3 million** (11% organically), while Average Revenue per MUP (ARPMUP) decreased **5% to $108** (7% organically), with the company live in **25 states** for mobile sports betting Key Operational Metrics | Metric | Q1 2025 | YoY Change (Reported) | YoY Change (Ex-Jackpocket) | | :--- | :--- | :--- | :--- | | Monthly Unique Payers (MUPs) | 4.3 million | +28% | +11% | | Average Revenue per MUP (ARPMUP) | $108 | -5% | +7% | - DraftKings is live with mobile sports betting in **25 states** and Washington, D.C., covering approximately **49% of the U.S. population**[7](index=7&type=chunk) - The company is live with iGaming in **5 states**, representing about **11% of the U.S. population**[11](index=11&type=chunk) - Following voter approval in Missouri, DraftKings expects to launch its Sportsbook product in the state, pending necessary approvals[11](index=11&type=chunk) [Financial Statements](index=2&type=section&id=Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2025, including statements of operations, balance sheets, and cash flows [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 revenue grew to **$1.41 billion**, with loss from operations significantly narrowed to **$(46.3) million** and net loss per share reduced to **$(0.07)** Consolidated Statements of Operations | (In thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $1,408,806 | $1,174,996 | | Loss from operations | $(46,331) | $(138,838) | | Net loss attributable to common stockholders | $(33,864) | $(142,568) | | Loss per share (Basic and diluted) | $(0.07) | $(0.30) | [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets reached **$4.52 billion**, with cash and cash equivalents at **$1.12 billion**, and total liabilities increasing to **$3.64 billion** due to a new Term B Loan Consolidated Balance Sheets | (In thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,119,740 | $788,287 | | Total assets | $4,515,813 | $4,283,725 | | Total liabilities | $3,642,898 | $3,273,099 | | Total stockholders' equity | $872,915 | $1,010,626 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, net cash used in operating activities was **$(119.0) million**, while financing activities generated **$372.8 million** primarily from a new Term B Loan Consolidated Statements of Cash Flows | (In thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(119,016) | $(70,395) | | Net cash provided by (used in) investing activities | $(39,019) | $(39,199) | | Net cash provided by (used in) financing activities | $372,823 | $(30,642) | [Revenue Disaggregation](index=4&type=section&id=Revenue%20Disaggregation) Sportsbook revenue grew **20.1% to $882.0 million**, iGaming revenue increased **14.5% to $423.5 million**, and Other Revenue surged **45.7% to $103.4 million** Revenue by Segment | (In thousands) | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Sportsbook Revenue | $881,957 | $734,055 | 20.1% | | iGaming Revenue | $423,471 | $369,997 | 14.5% | | Other Revenue | $103,378 | $70,944 | 45.7% | | **Total Revenue** | **$1,408,806** | **$1,174,996** | **19.9%** | [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) DraftKings uses Adjusted EBITDA and Adjusted EPS as key non-GAAP metrics to assess core operational performance, providing reconciliations to GAAP equivalents - The company uses Adjusted EBITDA and Adjusted Earnings (Loss) Per Share to evaluate operating performance, similar to its U.S. competitors[23](index=23&type=chunk) - Adjusted EBITDA is defined as net income (loss) adjusted for interest, taxes, D&A, stock-based compensation, transaction costs, and other non-recurring items[24](index=24&type=chunk) - Adjusted EPS is defined as basic EPS adjusted for amortization of acquired intangibles, stock-based compensation, and other non-recurring items[25](index=25&type=chunk) [Reconciliation of Net Income (Loss) to Adjusted EBITDA](index=8&type=section&id=Reconciliation%20of%20Net%20Income%20(Loss)%20to%20Adjusted%20EBITDA) Adjusted EBITDA for Q1 2025 significantly increased to **$102.6 million** from **$22.4 million** in Q1 2024, primarily by adjusting for stock-based compensation and D&A Reconciliation of Net Loss to Adjusted EBITDA | (In thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | $(33,864) | $(142,568) | | Stock-based compensation | $78,846 | $93,535 | | Depreciation and amortization | $70,116 | $53,180 | | **Adjusted EBITDA** | **$102,630** | **$22,390** | [Reconciliation of EPS to Adjusted EPS](index=8&type=section&id=Reconciliation%20of%20EPS%20to%20Adjusted%20EPS) Adjusted Earnings Per Share improved to **$0.12** in Q1 2025 from **$0.03** in Q1 2024, adjusting GAAP basic loss per share for stock-based compensation and amortization Reconciliation of EPS to Adjusted EPS | Per Share Data | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Basic earnings (loss) per share | $(0.07) | $(0.30) | | Stock-based compensation | $0.16 | $0.20 | | Amortization of acquired intangible assets | $0.09 | $0.06 | | **Adjusted Earnings (Loss) Per Share** | **$0.12** | **$0.03** |

Q1 2025 EARNINGS PRESENTATION May 8, 2025 | 1 Legal Disclaimer Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including statements about DraftKings Inc. ("DraftKings", the "Company", "we", "us" and "our") and its industry that involve substantial risks and uncertainties. All statements, other than statements of historical fact, cont ...

DraftKings (DKNG) came out with quarterly earnings of $0.12 per share, missing the Zacks Consensus Estimate of $0.18 per share. This compares to loss of $0.30 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -33.33%. A quarter ago, it was expected that this company would post a loss of $0.19 per share when it actually produced a loss of $0.28, delivering a surprise of -47.37%.Over the last four quarters, the company has surpass ...

Core Insights - DraftKings reported first-quarter revenue of $1.41 billion, a 20% increase year-over-year, but fell short of the consensus estimate of $1.44 billion [1] - The company reported earnings per share of 12 cents, missing the consensus estimate of 22 cents per share [1] Revenue Growth Drivers - Revenue growth was attributed to strong customer engagement, new customer acquisition, a higher structural sportsbook hold percentage, and the impact of the Jackpocket acquisition [2] - Monthly Unique Payers (MUPs) increased by 28% to 4.3 million, driven by strong retention and acquisition, as well as the Jackpocket acquisition [2] - Excluding the Jackpocket acquisition, MUPs would have increased by 11% year-over-year [2] Average Revenue Metrics - Average revenue per MUP was $108, down 5% year-over-year, primarily due to the inclusion of Jackpocket customers [3] - Without the Jackpocket acquisition, average revenue per MUP would have increased by 7% year-over-year [3] Market Presence - DraftKings operates mobile sports betting in 25 states and Washington D.C., with iGaming available in five states [4] - The company is also active in Ontario, Canada, covering 40% of the country's population [4] Future Guidance - DraftKings plans to launch its sportsbook in Missouri pending approvals, with the state legalizing sports betting in November 2024 [5] - The company revised its full-year revenue guidance down to a range of $6.2 billion to $6.4 billion from a previous range of $6.3 billion to $6.6 billion [5] - Full-year adjusted EBITDA guidance was also lowered to a range of $800 million to $900 million from $900 million to $1.0 billion [6] Stock Performance - DraftKings stock rose by 3.9% to $36.74 in after-hours trading, within a 52-week trading range of $28.69 to $53.61 [7]