“Customers Appreciate Transparency,” Says Jason Robins on the Gaming Surcharge Tax

Jason Robins Defends Gaminx Surcharge Tax

The news that DraftKings plans to impose an additional fee on players’ winnings starting in 2025 in four states with the highest tax rates shook the industry on Thursday. This move has been largely criticized for setting a precedent of shifting part of the operator-paid tax burden onto the players.

During Friday’s earnings call, CEO Jason Robins defended the decision, emphasizing that it would provide greater transparency, as players would know the actual costs related to the taxes paid by the operator.

“I know there’s maybe benefit to hiding it because maybe people don’t notice, but I think over the long term customers appreciate transparency. And even if they don’t love that, their state implemented a high tax, and some of that has been passed along,” Robins said.

Robins also cited examples from other industries where consumers pay the full amount of the tax associated with a purchase. “If you look at the way it’s typically done in other industries, whether it be hotel taxes, or even the sales tax that you pay when you buy something at the store, taxis, you name it, it’s typically line itemed out separately and usually 100% passed along to the consumer. In this case, we’re obviously subsidizing a chunk of it,” Robins claimed.

DraftKings Reports 26% Revenue Growth

DraftKings has yesterday reported financial results for the second quarter ended June 30, 2024. The company achieved revenue of $1.1 billion, marking an increase of $230 million, or 26%, compared to $875 million during the same period in 2023.

The revenue growth was primarily driven by enhanced customer engagement, acquisition of new customers, expansion of the Sportsbook product into new jurisdictions, higher structural sportsbook hold percentage, and the recent acquisition of Jackpocket.

The company has also reported $128.0 million in Adjusted EBITDA for Q2 2024, up 75% from Q2 2023.

Commenting on Q2 results, Jason Robins, CEO and Co-founder of DraftKings said “We very efficiently acquired many more new customers than we expected and saw continued healthy existing customer engagement in the second quarter. We will continue to capitalize on the healthy customer acquisition environment for the rest of 2024, which positions us to achieve $900 million to $1.0 billion of Adjusted EBITDA in 2025.”

He also ensured that “implementing a gaming tax surcharge in high-tax states that have multiple mobile sports betting operators could drive Adjusted EBITDA upside on an annual basis.”

Furthermore, DraftKings’ Board of Directors authorized the repurchase of an aggregate of up to $1.0 billion of its Class A common stock. “We are very excited about DraftKings’ Free Cash Flow trajectory. In light of that, we are pleased to announce a $1.0 billion inaugural share repurchase authorization, which reflects our confidence in the Company’s attractive long-term outlook and healthy balance sheet,” said Alan Ellingson, DraftKings’ Chief Financial Officer.

Revised EBITDA Guidance

In its earnings report released on August 1, DraftKings has announced a reduction in its 2024 Adjusted EBITDA guidance midpoint from $500 million to $380 million.

This revision prompted a nearly 11% drop in the company’s share price, falling to $32.44 in morning trading as investors reacted to the lowered guidance and the announcement of a winnings surcharge in high-tax states.

However, following a positive revenue trajectory, the company also increased its full-year 2024 revenue guidance midpoint to $5.15 billion from the previous $4.9 billion.