DraftKings(DKNG) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, revenue grew 43% year-over-year to nearly $2 billion, with Adjusted EBITDA reaching $343 million, four times the prior year period [5][14] - Adjusted EBITDA margin expanded by over 1,000 basis points year-over-year to 17% [5][14] - For the fiscal year 2025, revenue increased 27% year-over-year to above $6 billion, and Adjusted EBITDA more than tripled to over $600 million [7][17] - The company reported positive net income for the first time in fiscal year 2025 and repurchased 16 million shares during the year [7][17] Business Line Data and Key Metrics Changes - Fantasy revenue increased as the Pick Six product began to scale [14] - Sportsbook revenue increased over 30% year-over-year, with Q4 revenue rising 64% year-over-year to $1.4 billion [15] - iGaming revenue grew by 20% due to expanded offerings [15] - Lottery revenue benefited from a stronger jackpot environment and the rollout of new games [15] Market Data and Key Metrics Changes - Sportsbook handle increased 11% year-over-year to $54 billion, with a total potential payout across all open wagers of $2.5 trillion [16] - In January, Sportsbook handle increased 4% year-over-year, despite sportsbook-friendly outcomes in previous months [8][16] Company Strategy and Development Direction - The company is focusing on the predictions market as a significant growth opportunity, targeting hundreds of millions in annual revenue in the coming years [6][10] - DraftKings plans to integrate Railbird and launch a market-making division to enhance customer experience and liquidity [12][13] - The company aims to lead the predictions category and is supportive of regulatory frameworks that facilitate market growth [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business model's efficiency and sustainability, expecting continued revenue and Adjusted EBITDA growth [7][8] - The regulatory environment for predictions has improved, providing a stable backdrop for growth [22][23] - Management anticipates that predictions will not cannibalize existing sportsbook revenue, as initial adoption rates have been strong [8][9] Other Important Information - The company repurchased 8 million shares in Q4 2025 and plans to remain active in share repurchases as Adjusted EBITDA grows [5][14] - The predictions market is expected to represent a $10 billion annual gross revenue opportunity in the future [10] Q&A Session All Questions and Answers Question: Why is the company more aggressively leaning into prediction markets now? - Management noted that the regulatory environment has stabilized, allowing for more confident investment in predictions, which is seen as a significant growth opportunity [22][23] Question: Can you provide insights on the revenue guidance for 2026? - Management indicated that the guidance reflects expected investments in predictions and disciplined planning, with a revenue range of $6.5 billion to $6.9 billion [18][19] Question: What could drive revenue higher in 2026? - Predictions are seen as an upside opportunity, with no revenue included in the guidance for 2026, as the focus will be on customer acquisition [33][34] Question: How is the competitive environment characterized? - Management described the current promotional environment as rational, with no significant uptick in promotional intensity from smaller operators [71][86] Question: What are the expectations for prediction markets influencing state legislation? - Management noted that there is traction in discussions around legalization and that states are considering the implications of predictions on existing sports betting frameworks [74]