Volatility at DraftKings: Challenges and Opportunities in the NFL Fiscal Year | Eulerpool News

DraftKings‘ stock price fell as much as 7% in after-hours trading after the company cut its fiscal 2024 forecasts. This adjustment is largely due to NFL game results, which caused a $250 million drop in revenue due to their crowd-pleasing outcomes, according to the company’s CEO. In the quarter ended Sept. 30, DraftKings reported revenue of $1.1 billion, meeting consensus estimates. The loss per share was $0.60, worse than the expected $0.42. Shares then quickly fell 7%. In addition to the 2024 forecast, DraftKings gave its first outlook for fiscal 2025 and expects revenue between $6.2 billion and $6.6 billion, topping estimates of about $5.86 billion. However, the company also made a number of downward revisions to revenue and EBITDA expectations for 2024. These changes were largely due to NFL games that unexpectedly went in favor of the audience. These games mainly involve games where the favorite wins, which usually attracts more betting from the public. The majority of the NFL season falls in the current and fourth quarters, which have the most betting and the highest volatility among the major US leagues. According to Robins, NFL results were very customer-friendly early in the fourth quarter. This had a negative effect on the 2024 sales forecast of $250 million and on adjusted EBITDA of $175 million. In the quarter, average monthly users increased to 3.6 million, up 57% from 2023 (2.3 million) and more than doubling from 2022 (1.6 million). Average revenue per monthly user fell to $103, a 10% decrease compared to 2023 ($114), but an increase of 3% compared to 2022 ($100). The company’s marketing spending increased slightly for the second quarter in a row. Sales and marketing expenses in the third quarter were $340 million, an increase of approximately 9% compared to the same quarter last year ($313.3 million). These costs are closely watched by investors because they play a central role in how expensive it is to acquire new customers. Robins explained in his letter that customer acquisition costs fell “nearly 20%” in the quarter and that DraftKings is improving its expectations for promotions for the remainder of the fiscal year. “We have made significant progress in identifying customers with lower lifetime values, particularly in high-tax states, and are accordingly improving our expectation for promotions for the remainder of fiscal 2024,” he said. “We continue to drive cost efficiencies across the business to balance growth and profitability. Promotions optimization and spending efficiency initiatives will contribute $55 million to adjusted EBITDA for fiscal year 2024.”