DraftKings(DKNG) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the fiscal year 2024, revenue increased by 30% year-over-year to $4.8 billion, and adjusted EBITDA improved by$ 332 million year-over-year to $181 million, marking the first positive free cash flow in the company's history [7][8] - In Q4 2024, revenue was$ 1.393 billion, representing a 13% year-over-year growth, with adjusted EBITDA of $89 million [17][18] - Customer acquisition costs were at record lows, with 3.5 million new customers acquired, increasing the total customer base by 42% year-over-year to 10.1 million [8][17] Business Line Data and Key Metrics Changes - The structural Sportsbook hold percentage improved by 80 basis points year-over-year to 11.2% for Q4 2024, with promotional reinvestment outperforming expectations [18] - Adjusted gross margins reached 45%, reflecting the improved structural Sportsbook hold percentage and optimization of promotional offers [18][25] Market Data and Key Metrics Changes - The company noted strong customer engagement and retention, particularly during the Super Bowl, where the DraftKings Sportsbook app reached 1 in the App Store in the sports category [21] - The same-game Parlay handle increased approximately 40% year-over-year, contributing to the highest Sportsbook gross gaming revenue day in the company's history [22] Company Strategy and Development Direction - The company aims to extend its lead in live betting, focusing on integrating recent acquisitions to enhance product offerings [12][14] - DraftKings is positioned to capture significant market share in the growing real money online gaming industry, with plans to explore international expansion in the long term [11][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory for 2025, with revenue guidance raised to$ 6.3 billion to $6.6 billion, representing year-over-year growth of 32% to 38% [23][24] - The company anticipates that investments in live betting will be neutral to adjusted EBITDA in 2025 and positive in 2026 and beyond [23][68] Other Important Information - The company plans to optimize its capital structure and explore opportunities in the debt markets while maintaining a prudent approach to leverage [14][70] - Management emphasized the importance of establishing relationships with event organizers to enhance customer acquisition and engagement [78] Q&A Session Summary Question: Trends on volume and handle growth - Management noted that handle growth slowed in Q4 2024 but has accelerated since the elections, with confidence in 2025 due to positive trends [28][30] Question: Promotional intensity and its evolution - Management expects a meaningful decline in promotional intensity in 2025, reflecting the industry's maturation [39] Question: In-play betting trajectory - Management highlighted the importance of product quality and partnerships with broadcasters to enhance in-play betting experiences [45][48] Question: Guidance adjustments - Management refrained from raising guidance prematurely, emphasizing the need for consistent performance tracking [50][51] Question: Customer acquisition in older states - Management indicated that older states have reached high population penetration, with ongoing growth potential [73][76] Question: ROI of sponsorship strategies - Management acknowledged the success of specific events but emphasized the need for a consistent framework for evaluating sponsorship ROI [78] Question: Live betting adoption - Management sees significant upside in live betting adoption, with trends indicating increasing customer engagement [84][86] Question: Jackpocket cross-sell effectiveness - Management expressed optimism about Jackpocket's potential, particularly in states with legal sports betting [131] Question: Structural hold trends - Management noted better-than-expected performance in structural hold, with continued improvement anticipated [108] Question: Gaming taxes and cost structure - Management indicated no anticipated changes in gaming taxes for 2025, maintaining a conservative approach to guidance [126]