DraftKings announces 26% revenue growth in Q2, plan to tax winning bets in high-rate states

DraftKings reported a 26% increase in second-quarter revenue, reaching $1.104 billion, up from $875 million in the same period last year. The operator saw its first profitable quarter as a public company with diluted earnings per share of $0.10. Adjusted earnings per share remained at $0.22 for Q2 2024.

The sports gambling giant raised its 2024 revenue guidance midpoint to $5.15 billion. However, it also revised its adjusted EBITDA guidance for 2024 down to $380 million from $500 million, while maintaining its 2025 adjusted EBITDA expectation between $900 million and $1 billion.

The board authorized the repurchase of up to $1 billion in Class A common stock, with CFO Alan Ellingson stating that the inaugural share repurchase authorization "reflects our confidence in the company’s attractive long-term outlook and healthy balance sheet."

DraftKings saw a significant 50% increase in Monthly Unique Payers (MUPs), rising to 3.1 million in Q2 2024. However, average revenue per MUP (ARPMUP) decreased by 15% to $117. CEO Jason Robins said: "We very efficiently acquired many more new customers than we expected and saw continued healthy existing customer engagement in the second quarter."

To mitigate the impact of high state taxes, DraftKings told investors it plans to implement a gaming tax surcharge on net winnings in states with tax rates over 20%, starting January 1, 2025. Robins said the move could drive Adjusted EBITDA upside on an annual basis.

The surcharge will apply to net winnings in states like New York, Pennsylvania, Vermont, and Illinois. Sportsbooks like DraftKings had previously expressed doubts about whether they could generate profits while paying those taxes.

The fee will vary by state and was not specifically defined in a letter to stakeholders, will only apply to winning bets, and will be treated as a separate transaction when paying out winnings.

During the quarter, DraftKings expanded its market presence by launching its sportsbook product in Washington, D.C., bringing the total to 25 states and D.C. The company also operates iGaming in five states and Ontario, Canada, with plans to launch in Puerto Rico pending approvals.

The acquisition of Jackpocket Inc., completed on May 22, 2024, contributed to revenue growth and the increase in MUPs, although it also impacted the ARPMUP decline.

The company’s stock has risen about 14% over the past 12 months.