DraftKings revenues and net loss continue to grow in Q3
DraftKings has released its financial results for the third quarter of 2021, showing revenues of $212.8m, an increase of 60.2% compared to the same period in 2020.
Revenue for the period was in line with the guidance the business previously offered during its second quarter earnings call earlier this year.
The vast majority, $189.1m, came from DraftKings’ B2C operations, up 82.4% year-on-year, while the remaining $23.7m came from its B2B offering, primarily comprised of SBTech. The B2B segment saw a reduction in revenue of 18.7% compared to Q3 2020.
DraftKings said: “The $85.4 million increase in our B2C segment revenue was primarily attributable to our online gaming revenues which increased $76.8 million, or 77.2%, to $176.3 million in the three months ended September 30, 2021, from $99.5 million in the three months ended September 30, 2020.”
“The remaining increase in our B2C segment revenue was attributable to “Other” revenues, which primarily includes media and retail Sportsbooks.”
After costs, the business reported a negative EBITDA figure of $313.6m, and a net loss of $545.0m for the quarter.
Expenses & guidance
Sales and marketing accounted for DraftKings’ largest expense, at $303.7m. General and administrative costs totalled $219.7m, while the cost of revenue was $170.7m. Product and technology costs were $65.2m, leaving a loss from operations of $546.5m.
After losing $1.6m in interest expenses, a gain of $7.1m on remeasurement of warrant liabilities, paying income taxes of $3.8m and sustaining a $202,000 loss from equity method investment, the business recorded its net loss of $545.0m.
This is larger than DraftKings’ net loss of $395.7m in Q3 2020, and brings the year-to-date net loss total for 2021 to $1.20bn.
Following the publication of its results, the operator has increased the midpoint of its 2021 revenue guidance to $1.26bn, and reduced the guidance range to between $1.24bn and $1.28bn, compared to its previous guidance range for the year of between $1.21bn and $1.29bn.
It also introduced 2022 revenue guidance between $1.7bn and $1.9bn, which would give a growth rate of around 43% based on the mid-point of that range and revenue guidance for 2021.
New launches in Q3
The operator, which following state launches in Wyoming, Arizona and Connecticut, is now live with mobile sports betting in 15 states, also saw the number of monthly unique players using its products increase by 31% year-on-year, to an average of 1.3m.
Average revenue per monthly unique player was also up at $47 – 38% ahead of the average recorded in Q3 2020.
In addition to its sports betting state launches, DraftKings introduced iGaming into Connecticut during Q3, marking its fifth active iGaming market in the US.
The business also said it has completed the full online and retail migration to in-house technology ahead of schedule during the quarter, and that it is already experiencing benefits from the transition to its own technology.
In addition, it launched DraftKings Marketplace, offering curated NFT drops and supporting secondary-market transactions, as well as micro-betting options across its sportsbook and DraftKings Rocket, the latest addition to the operator’s internally developed game portfolio.
The inside view
“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,” said Jason Robins, DraftKings’ co-founder, chief executive officer and chairman of the board.
“Since migrating, we have rapidly added innovative features and functionality to our top-ranked mobile sports betting app. 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.”
Jason Park, DraftKings’ chief financial officer, added: “Fundamental user acquisition, retention and engagement trends in the third quarter were outstanding across all of our online gaming products. We delivered $213 million in third quarter revenue which represents a 60% year-over-year increase.”
“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. Our key performance indicators also continued to grow, as Monthly Unique Payers increased by 31% and Average Revenue Per Monthly Unique Payer grew by 38%.”
On today’s earnings call, Jason Robins added that the business is confident in its state-by-state path to profitability – though he said there is a 2-3 year timeline for many newly regulated states to become profitable for the operator.
Golden Nugget Online Gaming acquisition
DraftKings said it expects to close its acquisition of Golden Nugget Online Gaming (GNOG) in the first quarter of 2022, and that acquiring the business will enable greater iGaming market share potential while making marketing efforts more efficient, as the operator will benefit from multiple brands able to serve different customer segments.
GNOG’s live dealer operational capabilities will also be brought in-house, and DraftKings expects resulting synergies of over $300m in EBITDA at maturity.
GNOG shareholders will receive 0.365 DraftKings Class A common shares for each existing GNOG share, giving an offer price of $18.83 per share based on DraftKings $51.59 closing price on 6 August.
This implies an equity market valuation of around $1.56bn for GNOG.
As part of the combination, DraftKings has also entered into an extensive commercial agreement with Fertitta Entertainment, which provides enhanced market access, database access and integration with retail, restaurants and retail sportsbooks.
DraftKings said its key priorities for the future are continuing customer acquisition, entering new states, creating the best technology and pursuing M&A opportunities.