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mobile betting giant draft king As the company looks to boost profits, it plans to tax consumers in states with the highest sports betting taxes.
The company announced Thursday that starting next year it will impose a gaming surcharge on winning bets in states with multiple gaming operators and tax rates above 20%. These include Illinois, New York, Pennsylvania and Vermont.
Jason Robins, CEO and co-founder of DraftKings, told CNBC: “We think the best thing to do is follow what other industries are doing, whether it’s a restaurant, a taxi, or anything else that you buy is generally subject to some kind of tax.
The news comes as the sports betting operator unveiled its Second quarter financial report, marking the company’s first profit as a public company. DraftKings reported revenue of $1.1 billion, roughly in line with consensus estimates, according to LSEG.
Concerns about higher taxes on the gaming industry have weighed on shares of DraftKings and other gaming companies, such as fan duel Back in May, Illinois approved a tax increase on sports betting revenue. The sliding tax rate imposes a 40% tax on companies with the largest adjusted gross income. New York and New Hampshire each maintain a 51% tax rate on sports betting companies.
Robbins said in a letter to shareholders on Thursday that the new surcharge would be symbolic for customers. In Illinois, for example, this would represent a low- to mid-single-digit percentage of the net award.
“If you bet $10 and win $20, you pay 30 cents,” Robbins said.
Illustration of the DraftKings app, introducing new game premiums.
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DraftKings is believed to be the first U.S. operator to tax bettors’ winnings. Robbins said he weighed the issue carefully and hoped it would make states reconsider their tax rates.
“I do think if states start to realize this beyond a certain level that we can’t invest in our products and customer experience in the way that we need to… it might make them think differently about it,” he added.
He’s still considering customer reactions. “We’re not going to hide it,” Robbins said. “Obviously, if some customers don’t like it, we may see them abandon it, as well as player betting activity.”
Robbins said DraftKings has not incorporated the new tax into its guidance.
The company raised its revenue guidance to a range of $5.05 billion to $5.25 billion from the previous range of $4.8 billion to $5 billion. The updated guidance equates to annual growth of 38% to 43%.
But the sports betting giant lowered its 2024 adjusted EBITDA guidance to a range of $340 million to $420 million, down from previous guidance of $460 million to $540 million.
The company reported second-quarter profits for the first time, with net income of $63.8 million, or 10 cents per share, in the three-month period ended June 30, compared with a net loss of $77.3 million, or 17 cents per share. a year ago.
Analysts polled by LSEG expected a loss of 1 cent per share in the period.
Revenue increased to US$1.1 billion, an increase of 26% from US$874.9 million in the same period last year. The company said revenue growth was mainly driven by continued healthy customer engagement, expansion into new jurisdictions and the acquisition of lottery app Jackpocket.
“The outperformance we’re seeing in customer acquisition, the launch in Washington, D.C., our expectations for Jackpocket to achieve positive EBITDA next year and the underlying trends with our existing customers and our performance in handles, all of that should offset the Illinois Taxes are going to increase next year,” Robbins said on the company’s earnings call. “So even if we don’t get any benefit from this charge, adjusted EBITDA next year will still be $900 million to $1 billion.”
Now in more than 30 states allow Some form of sports betting, many of which allow mobile and online betting. DraftKings operates mobile sports betting operations in 25 states and Washington, DC.
The company said that so far this year, 10 jurisdictions have either introduced legislation to legalize mobile sports betting or introduced a bill that could lead to a referendum on mobile sports betting during the upcoming election.
DraftKings also announced its first $1 billion stock buyback program. The company has a market capitalization of approximately $14 billion.
