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DraftKings expects to generate positive adjusted EBITDA by 2024 as the company improves its financial bottom line following years of significant losses.

DraftKings made its strongest projection yet toward improved EBITDA flow in Thursday’s earnings release, announcing the company expects to generate positive contributions in 2024 after losing roughly $4bn overall since 2019.

DraftKings attributed the improvements in part due to “a meaningful slowdown” in the growth rate of its fixed costs, according to the company’s Q4 2022 earnings release.

“I am very pleased with how we concluded 2022, with continued top-line growth and strong focus on expense management,” DraftKings CEO Jason Robins said in a statement.

The company stock spiked more than 6% in after-hours trading Thursday following the earnings announcement.

Topline numbers

DraftKings improved its fiscal year 2023 AEBITDA outlook to losses of between ($350m) and ($450m) compared to its prior fiscal year 2023 Adjusted EBITDA guidance of between ($475m) and ($575m) it announced during its Q3 2022 earnings call. This would reflect the company’s most profitable fiscal year since the company became publicly traded in 2019.

The company is raising its fiscal year 2023 revenue guidance to a range of $2.85bn to $3.05bn from a range of $2.8bn to $3bn it announced during its previous earnings call. The updated 2023 revenue guidance range equates to year-over-year growth of 27% to 36%.

DraftKings announced $855 in Q4 2022 revenue, an 81% year-over-year increase from Q4 2021. The company improved Q4 AEBITDA losses from nearly ($128m) in Q4 2021 to around ($50m) in Q4 2022.

This includes expenses accompanying online sports betting launches in Maryland in November 2022 as well as Ohio in January of this year. DraftKings will launch its online sportsbook in its home state of Massachusetts in March and then Puerto Rico later this calendar year.

Overall, the company’s total AEBITDA losses grew from ($676) in calendar year 2021 to ($722m) in calendar year 2022.

Officials attributed the recent success to better player retention as well as improved monetization as promotional intensity declines in mature markets.

News nugget

DraftKings has given investors a long-awaited timeline for positive contributions. The company has spent even more aggressively in marketing, free bets, advertising and other promos than other leading operators in an all-encompassing player acquisition mission that Robins and other DraftKings officials have said will lead to long-term profitability.

DraftKings has the No. 2 spot in the nation’s combined online sports betting and iGaming handle but has recorded steeper losses than its closest competitors due to its massive spending.

The updated profitability timeline comes as DraftKings biggest rivals are nearing or have already reached the red. FanDuel, DraftKings’ fellow daily fantasy sports pioneer-turned-sportsbook and iGaming giant had a positive quarter last calendar year and expects a profitable calendar year 2022.

BetMGM, the nation’s No. 1 iCasino platform by handle, expects a positive quarter in 2023. Smaller competitors including Caesars and Barstool also expect to reach profitability this year.

Best quote

CEO Jason Robins: “Moving into 2023, we will continue to drive revenue growth and focus on expense management to accelerate our adjusted EBITDA growth. We have already taken several actions that resulted in an increase to our revenue guidance and significant improvement in our adjusted EBITDA guidance.”

Best question

DraftKings previously announced it would separate quarterly earnings call from its formal results announcement, a move rarely taken by gaming companies. DraftKings officials are set to take questions Friday morning.

It was unclear why DraftKings split the earnings call and announcement into separate days.

Current trading and outlook

Stock for DraftKings finished roughly even during regular trading Thursday but touched gains of more than 7% during after-hours trading as investors responded positively to the company’s improved financial outlook.

DraftKings stock is up around 17% in the past week and 35% in the past month. The company stock is still down significantly from its all-time peak nearly two years ago.

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