DraftKings’ 47% revenue growth above Q4 estimates; shares drop over widened net loss, missed MUPs mark

Sports betting giant DraftKings has shared its fourth quarter and full-year 2021 financial report. The company describes its results for Q4 as “better than expected,” presenting a 47% year-over-year revenue increase that beat guidance by 8%

For the three months ended December 31, the company reported revenue of $473 million, compared to $322 million during the same period the prior year. Monthly Unique Players for its B2C segment increased 32%, with 2 million MUPs engaging with DraftKings during each month on average, which reflects the business’ “strong unique player retention and acquisition.”

“DraftKings’ strong fourth-quarter performance exceeded our expectations on the top and bottom line,” said Jason Robins, DraftKings’ co-founder, Chief Executive Officer and Chairman of the Board. “Our excellent quarter capped off a year in which five of our states were Contribution Profit positive, further demonstrating the effectiveness of our state playbook and supporting our positive view of the industry’s TAM.” 

The company now enters 2022 positioned to grow its market share, further optimize user experience and continue to strengthen its multi-product suite of offerings, adds Robins. As a result, DraftKings is raising its 2022 revenue guidance from a range of $1.7 billion to $1.9 billion to a range of $1.85 billion to $2.0 billion, equating to Y-o-Y growth of 43% to 54%.

Additionally, the gaming giant is also introducing an Adjusted EBITDA guidance, with an expected loss in 2022 to be between $825 million and $925 million. This, along with the revenue guidance, reflects the launch of mobile sports betting in New York and Louisiana in January and the company’s “demonstrated ability to engage users and acquire customers efficiently.”

“We grew revenue 47% year-over-year to $473 million in the fourth quarter despite lower-than-expected hold in October primarily due to NFL game outcomes,” added Jason Park, DraftKings’ Chief Financial Officer. “Our key performance indicators reflected excellent player retention, acquisition and cross-selling in the quarter.”

Average revenue per MUP was $77 in the fourth quarter, representing a 19% increase versus the same period in 2020, benefitting from a continued mix shift into the company’s sportsbook and iGaming product offerings and cross-selling customers into more products.

Based on all of the states where DraftKings is currently live, and should legalization trends remain consistent with prior years, the company “would expect” to generate positive Adjusted EBITDA “in the fourth quarter of 2023.” The company is now live with mobile sports betting in 17 states, collectively representing about 36% of the US population.

Despite the “better than expected results” and revenue increase, shares of DraftKings tumbled 15.4% in premarket trading on Friday due to the company having posted another quarterly loss, which widened from a year ago amid increasing business costs.

The net loss for Q4 increased to $326.3 million from $242.7 million in the prior year’s fourth quarter, while it increased to $1.5 billion in full-year 2021, from $1.2 billion in 2020. Revenue for the twelve months ended December was $1.3 billion, up from $643.5 million in full-year 2020.

Despite DraftKings having shown confidence and pride in its capacities to attract new customers, Bloomberg warns it added fewer players in Q4 than Wall Street had expected, despite having spent hundreds of millions of dollars to lure new bettors. This spending could generate deep losses this year.

While the operator reported an average of 2 million MUPs engaging with DraftKings in Q4, analysts were looking for 2.1 million, according to estimates by the cited source. Experts further told the news site the 2022 EBITDA guidance is set to be “a disappointment” among tech investors avoiding large losses.