DraftKings Inc. Q3 FY2025 earnings call

• Jason Robins expressed bullishness about the future, noting underlying growth acceleration, new exclusive marketing agreements with ESPN and NBCUniversal, and upcoming launch of DraftKings predictions. - He highlighted progress in sportsbook net revenue margin, with a projected over 400 basis points increase over 4 years. - Mentioned strong customer retention rates, with NFL week 1 customer retention up over 300 basis points. - iGaming showed solid acceleration in Q3 net revenue, driven by growth in active customers and net revenue per customer. - Announced Board authorization to increase share repurchase program from $1 billion to $2 billion.

In the third quarter, DraftKings generated $1.144 billion of revenue, representing 4% year-over-year growth. Sportsbook handle increased 10% year-over-year to $11.4 billion. iGaming net revenue growth accelerated to 25% year-over-year in the third quarter, the fastest growth since Q1 2024. Sportsbook saw parlay handle mix surges with 800 bps for NFL season to date and 1,000 bps for NBA season to date.

• Fiscal year 2025 revenue guidance revised to $5.9 billion to $6.1 billion, down from prior range of $6.2 billion to $6.4 billion. - Fiscal year 2025 adjusted EBITDA guidance revised to $450 million to $550 million, down from prior range of $800 million to $900 million. - Guidance now includes expected launch of predictions market offering.

• Sport outcome variances can meaningfully impact reported financial results in certain periods. - Uncertainty around profitability and payback periods for prediction markets due to lack of data and nascent nature of the product. - Competitive risks in the prediction market space with other companies offering federally regulated predictions in all 50 states.

Q: David Katz asked about OSB hold percentage and how to get confidence it will swing back around.

A: Jason Robins noted Q2 had positive outcomes showing the business model's strength, and outcomes can swing either way over time.

Q: Stephen Grambling inquired about profitability of prediction market product.

A: Jason Robins said they'll be data-driven, conservative on LTV and payback periods initially due to lack of data, and will adjust as data is gathered.

Q: Robert Fishman asked about ESPN deal.

A: Jason Robins discussed long relationship with ESPN, leveraging their brand and media presence for product, marketing, and customer engagement.

Q: Ian Moore asked about attribution of parlay mix surge.

A: Jason Robins said it was a combination of product innovation (like stacks) and effective promo strategy (like Ghost Leg promotion).