DraftKings Q4 Earnings Raise Questions

Pressured by investors to show signs of profitability this year, DraftKings has found itself at a crossroads. DraftKings CEO Jason Robins admitted as much in a shareholder letter released by the company last week that touched on the vast changes the financial world underwent in 2022.

In the new economy, investors will no longer accept outsized losses as long as a company grows revenue, Robins wrote. The broader concerns seeped into the sports betting space. Specifically, that sector is where leading companies reined in extravagant marketing campaigns. Cause by the long-term lack of sustainability for the industry.

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While DraftKings projected revenue this year of at least $2.8 billion when it introduced 2023 full-year guidance last November, the company also estimated negative earnings of around $500 million.

After topping earnings and revenue estimates in the fourth quarter of 2022, DraftKings may have assuaged some investor concerns. Other investors, however, remain skeptical while questioning the company’s cost structure and executive compensation models.

Last week, DraftKings reported 2022 fourth-quarter revenue of $855 million, up 81% from the prior year’s quarter. With record revenue, the company beat Wall Street consensus estimates of $797.1 million for the three months ending Dec. 31, 2022.

DraftKings also reported adjusted EBITDA of -$49.9 million in the quarter. That marked improvement from the same quarter a year earlier (-$127.9 million) when net losses swelled above $325 million.

For the final quarter of 2022, DraftKings reported a net loss of $0.53 per share, compared with per-share losses of $0.80 in the year-ago period. Analysts projected a net loss of $0.63 per share.

DraftKings ended 2022 with revenue of $2.24 billion, nearly a billion more than the previous year. The company also concluded the year with an adjusted EBITDA of -$728.1 million, compared with -$676.1 million in 2021.

Robins focused intently on expense management on a conference call with Wall Street analysts. He noted that DraftKings cut in-year costs in 2022 by more than $100 million. Since DraftKings’ last earnings call in November, it has made expense reduction decisions backed by a strong analysis of the company’s expenses.

DraftKings announced the elimination of approximately 140 positions on Feb. 1, primarily consisting of employees outside the U.S.

While DraftKings ranked second for the quarter in U.S. online sports betting market share, the company far outpaced Bet MGM and Caesars.

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