DraftKings Sees Both Growth and Losses
In its most recently published Q3 earnings report, DraftKings’ revenue continued to grow year-on-year, which caused the business to raise its revenue guidance again. However, its losses also grew further due to ever-increasing expenses and less than favorable sporting results. Its overall revenue for the quarter was up 60.2% to $212.8 million.
DraftKings’ revenue continued to grow year-on-year, which caused the business to raise its revenue guidance again. However, its losses also grew during the same period. ©6689062/Pixabay
Revenue Would be Higher if not for Unfavorable Sporting Results
One of the country’s leading sportsbook operators, DraftKings, has just published its latest earnings report for Q3 2021, revealing that its revenue continued to grow year-on-year, causing the business to raise its revenue guidance again. However, its losses simultaneously grew further due to increased expenses and unfavorable sporting results.
Overall revenue for the quarter increased by 60.2% to a total of $212.8 million. These results stand as a significant year-on-year increase but were actually down from the $297.6 million recorded in Q2, as well as the $312.3 million recorded in Q1. The provider blamed this performance on “atypical hold rates” which occurred during the first month of NFL fixtures, thereby offsetting some of the benefits of new market openings.
Were it not for such unfavorable results, the sportsbook operator’s revenue would have been notably higher, according to DraftKings’ chief financial officer Jason Park. As a result, the operator decided to increase its full-year revenue guidance again, from between $1.21 billion and $1.29 billion to between $1.24 billion and $1.28 billion.
“Fundamental user acquisition, retention and engagement trends in the third quarter were outstanding across all of our online gaming products. On a same-state basis and taking into consideration lower-than-expected hold primarily due to NFL game outcomes, third quarter revenue would have been $40 million higher.”– Jason Park, Chief Financial Officer, DraftKings
In terms of breakdown, online gaming offerings comprised the vast majority of DraftKings’ revenue total for Q3 2021, up 76.8% year-on-year to $176.3 million, in conjunction with DraftKings’ monthly unique players increasing from 1 million to 1.3 million.
Revenue from gaming software decreased by 18.1% year-on-year to $23.7 million, while other revenue, such as media revenue from VSiN and retail betting revenue, managed to triple up to $12.8 million.
DraftKings’ Costs Continued to Rise in Q3
In terms of geographic breakdown, the US made up the vast majority of DraftKings’ revenue at a total of $188.2 million, which was up 76.1%, while international revenue came to $24.7 million. The operator noted that, similar to Q2’s report, SBTech offered the provider’s services through a reseller model in Asia, however this agreement was terminated as of April 1st.
DraftKings’ costs, however, have continued to rise at the same time as all this, though luckily more slowly than its revenue increases, growing by 57.8% to $759.3 million. Costs of revenue were also up 76% to $170.7 million, largely due to a $32.5 million increase in gaming taxes and a $14.2 million growth in payment processing fees.
Sales and marketing costs also rose significantly, this time by 49.8% to a total of $303.7 million. Costs related to the operator’s products and technology services were up 21% to $65.2 million, while general and administrative costs increased by 72.4% to $219.7 million, spurred in part by a $47.8 million increase in stock-based compensation costs.
All in all, DraftKings ended up with a total operating loss of $546.5 million, which represents an increase of 56.9% from the loss it made in Q3 of 2020.
Operator Successfully Migrated Away from Kambi Sportsbook Platform
Chief executive of DraftKings, Jason Robins, took the opportunity of its most recent Q3 earnings report to remark that the sportsbook provider successfully completed its migration away from Kambi’s sportsbook technology to SBTech’s offering over the duration of the quarter:
“DraftKings had a strong third quarter that highlights our team’s unique ability to drive engagement with our core customers while simultaneously launching new states and verticals and completing the complex migration to our own in-house technology ahead of schedule. Since migrating, we have rapidly added innovative features and functionality to our top-ranked mobile sports betting app.”– Jason Robins, Chief Executive, DraftKings
Robins also looked to the future in his statement, highlighting the DraftKings NFT Marketplace and its continued content and media partnerships: “We are also excited that our new growth initiatives, including DraftKings Marketplace and our content and media business, demonstrated promising early results in the quarter.”
DraftKings Pulled Out of Entain Negotiations in October 2021
In related news, a much-anticipated potential takeover of sports betting and gambling company Entain by DraftKings fell apart recently in October 2021, after the fantasy sports operator revealed it no longer had any intention in pursuing its takeover of Entain.
The revelation arrived upon the completion of further talks with Entain’s board of directors. DraftKings made its initial $22 billion offer to take over Entain at the end of September 2021.
Entain responded to DraftKings’ cancelation of its bid to acquire the company to emphasize its future as a dynamic and independent business:
“Entain has an outstanding track record of growth having delivered 23 consecutive quarters of double digit online NGR growth, representing a three-year CAGR of 19% across 2021. As a result the Board is confident in Entain’s ability to continue to deliver material value for its shareholders going forward.”
SEC Subpoenaed DraftKings in August
DraftKings was feeling the heat in August 2021 after it revealed that it received a subpoena from the US Securities and Exchange Commission (SEC) in response to allegations made in a report by short-sellers Hindenburg Research.
The report claimed that technology provider SBTech, which merged with DraftKings when the company went public in 2020, was operating in black markets through an illegal “front” business.
DraftKings clarified that, while it intended to fully cooperate with the SEC’s investigation, it did not foresee any serious consequences or changes as a result of the subpoena.
