Golden Nugget Online Gaming (GNOG) founder Thomas Winter has announced his departure from his role as the general manager of DraftKings North America.
Winter has decided to step away from his responsibilities to embark on a sabbatical journey, marking the end of a remarkable chapter in his career.
In a message shared on LinkedIn, Winter stated: “Ten years after founding Golden Nugget Online Gaming, three years after taking it public and two years after its acquisition by the almighty DraftKings Inc., time has come for me to close this extraordinary chapter of my life and open a new one, this time focused on the latter part of work-life balance.”
Winter originally founded GNOG in 2013. Under his leadership, GNOG achieved the top position as the number one online gaming operator in New Jersey in 2018, boasting an impressive 18% market share.
One of the major milestones in Winter’s career was taking the company public on the Nasdaq in December 2020.
Later, in August 2021, DraftKings acquired GNOG in a monumental $1.5bn transaction, and the merger was successfully completed in May 2022.
Subsequently, Winter assumed the role of general manager of North America for iGaming at DraftKings.
In his departure message, Winter expressed gratitude towards his colleagues and partners, which included DraftKings founders Jason Robins, Matt Kalish and Paul Liberman, as well as CBO Ezra Kucharz and CFO Jason Park.
He praised their understanding of the benefits of a multi-brand strategy and their trust in GNOG as the right addition to deliver on it.
While Winter’s departure marks the end of an era, he expressed confidence in the future of both DraftKings and Golden Nugget Online Gaming.
“Although I’ll miss the action, I can’t wait to see what the amazing DK/GNOG casino team, led by uber-talented Gregory Karamitis and superstar Signe Yama, will deliver to stay atop the US iGaming world for years to come. I’ll be rooting for y’all,” he said.
Before his tenure at Golden Nugget and DraftKings, Winter spent four years at Betclic Group, where he served in various leadership roles.
From July 2010 to December 2011, he held the positions of CEO and director at Betclic and Expekt. Prior to that, he played a key role as COO at both businesses.
Winter has expressed uncertainty about his future career steps, emphasising his desire to prioritise spending quality time with his wife and children, travelling, and dedicating time to improving his fitness and well-being.
Jason Robins insists DraftKings is focusing hard on optimisation as investors continue to grapple with the US sports betting operator’s path to profitability.
“I think there’s been a real strong energy put towards optimising faster or having to do better,” Robins said during a fireside chat with Goldman Sachs’ Stephen Grambling on 6 June.
“That’s what we should be doing at this stage of business and that’s what the environment is demanding we do. Certainly, that’s led to us focusing on efficiencies more than we have been, not just with marketing, but with everything up and down the P&L.”
While much of the focus to date has centred around DraftKings’ above-the-line marketing spend, another major expense relates to staffing costs and stock-based compensation.
The stock closed on 6 June at $13.08 per share, representing a 75% annual decline. Grambling asked Robins how the operator has been able to incentivise employees during this difficult period, with the share price under so much pressure.
DraftKings CEO Jason Robins: “That has led to us focusing on efficiencies more than we have been, not just with marketing, but with everything up and down the P&L.”
“It is definitely something we are paying attention to. People look at us as this company where maybe the multiple has to get back up to where it was for the stock to go up. But no, we just need to actually grow what’s underneath the multiple, and everybody understands that it’s going to be a profit multiple and not a revenue multiple.
“We’re able to say to the team, if you do this and drive these numbers, here’s where we can get back to and get above those multiples.”
Robins said DraftKings was a great place to work for reasons beyond compensation, with the company at the cutting edge of technology in a fast-growing industry where the rules and regulations are changing constantly.
Interestingly, Robins said DraftKings was content with losing its mediocre employees to rivals if it gave the company a better shot at retaining its top talent.
“We are making sure that the compensation is being directed differentially towards top performers and we are getting more aggressive with the bottom performers,” said Robins.
“Those employees who were sort of skating by as B players, we want to make clear that that is not enough anymore. That doesn’t mean mass layoffs, but it might mean we’re going to pay them less than the market and somebody else may recruit them away and we’re going to be okay with that, because we’re going to focus on retaining our top people,” he added.
DraftKings has also had to be wary of increasing staff costs relating to its acquisition of Golden Nugget Online Gaming (GNOG), although that purchase should bring customer acquisition and technology costs down over time.
DraftKings CEO Jason Robins: “Those employees who were sort of skating by as B players, we want to make clear that that is not enough anymore.”
The company will be able to cross-sell sports bettors into the higher margin GNOG iGaming segment while there will be fewer third-party technology expenses once the brand has been migrated onto DraftKings’ proprietary technology platform.
These synergies won’t be immediate, however, which is why the operator has immediately focused on keeping the bloat down with the swift termination of duplicate job roles.
“The first step for us, which largely we already have done, was to look at the headcount and make sure that the duplicate roles were synergised, and that people were allocated into the right parts of the organisation,” said Robins.
“I think the other thing is marketing – we talked about really validating that thesis and showing that we can spend less total in marketing by taking a segment we were not as cost effectively reaching with DraftKings and do so instead with GNOG for more efficient customer acquisition costs.”
DraftKings has reported a 34% year-on-year rise in revenue to $417m for Q1 2022 although net losses at the company deepened on both an annual and sequential basis.
Net losses for the three months ended 31 March came in at $467.7m, representing a further stretch into the red of 35% year-on-year and 43% quarter-on-quarter.
The operator also made an adjusted EBITDA loss of $289.5m in Q1, although this result was 12% better than guidance provided by management suggested in Q4 of 2021.
As a result, DraftKings has improved its full-year 2022 adjusted EBITDA guidance from a worst-case scenario deficit of $925m to $840m.
It has also raised 2022 revenue forecasts from a range of $1.85bn to $2bn to between $1.93bn and $2bn, which would equate to annual growth of between 49% to 56%.
However, the new guidance does not include contributions from its recently completed acquisition of Golden Nugget Online Gaming (GNOG), nor from the expected launch of online sports betting and iGaming operations in Ontario from Q2.
These two tailwinds will contribute up to an additional $150m in full-year revenue but a further decline of between $50m and $70m for adjusted EBITDA, according to estimates from CFO Jason Park.
Sales and marketing costs increased by 40.6% year-on-year to $321.5m, likely made worse by new state launches in both New York and Louisiana. The operator did not quantify the cost of launching mobile sports wagering in New York, whereas some competitors have published bottom line figures excluding The Empire State in the past week.
DraftKings CEO Jason Robins on GNOG: “Until we closed the deal, there were limitations with what the engineering team could have access to, so a lot of what you learn happens in the weeks after you acquire.”
CEO Jason Robins does expect marketing costs to improve in the coming quarters, however, as the business increases its national advertising mix over state-specific spend, which has already bolstered the firm’s profitability profile in New Jersey, according to Robins.
“DraftKings delivered significant growth across our key revenue and performance metrics,” said Robins. “We are not seeing any impact from inflationary pressures on customer demand, and we continue to improve the user experience by adding breadth and depth to our DFS, mobile sports betting and iGaming products.
“We are also improving our efficiency in acquiring and retaining customers and have a strong pipeline of new jurisdictions to enter,” he added.
Monthly Unique Payers (MUPs) increased by 29% year-on-year to two million monthly unique paying customers in Q1 for online sportsbook and iGaming, although DFS MUPs declined during the quarter.
Average revenue per MUP (ARPMUP) stood at $67 in Q1, up 11%. This was primarily driven by strong customer engagement and a continued revenue mix shift into iGaming product, although was partially offset by low hold rates during NCAA basketball and a rise in promotional intensity in newly launched states, and especially New York.
DraftKings is now live with mobile sports betting in 17 states that represent around 36% of the US population. The company is also live with iGaming in five states, representing approximately 11% of the population.
DraftKings bolstered its iGaming portfolio by sewing up the all-stock acquisition of GNOG this week. Analysts were keen to understand the integration timeline, with Robins suggesting a platform migration would contribute to $300m in eventual synergies.
“We have a strong integration plan so everyone knows what they need to do to perform that migration,” said Robins on the operator’s Q1 earnings call.
“Until we closed the deal, there were limitations with what the engineering team could have access to, so a lot of what you learn happens in the weeks after you acquire.
“We are not prepared to put a timeline on that integration now but will do in August and fully intend to do so,” he added.
DraftKings has completed the all-stock acquisition of Golden Nugget Online Gaming (GNOG), nearly nine months after the initial agreement was announced in August of 2021.
At that time, DraftKings stock was trading at $52 per share, which valued the transaction at $1.5bn. Since then, DraftKings’ share price has dropped like a stone.
It closed at $15.73 yesterday (4 May), meaning the total compensation for GNOG shareholders is now closer to $365m.
DraftKings eventually expects to deliver $300m worth of synergies resulting from the purchase, which will also substantially strengthen its iGaming online casino offering.
These synergies will be achieved by cross-sell between both businesses and verticals, as well as marketing efficiencies and reduced platform costs. GNOG will be migrated onto DraftKings’ proprietary technology platform in due course.
The company said in a statement: “DraftKings expects revenue to increase from additional cross-promotion opportunities, which would be expected to complementarily grow DraftKings’ customer base by engaging existing Golden Nugget Online Gaming’s iGaming-first customers.
“Additional anticipated revenue synergies include potential technology and game expansion, such as live dealer offerings.”
GNOG was the first company to launch a live dealer studio in the US, according to its investor relations website.
DraftKings has increased its long-term market share outlook for iGaming to between 20% and 25% by adding its existing market share together with Golden Nugget’s.
GNOG chairman Tilman Fertitta: “This will be an alliance unlike any other in the digital sports, entertainment and online gaming industry.”
DraftKings management also said the deal will reduce the burden of supplier costs and overhead duplication, while current and future retail sportsbook locations at Fertitta Entertainment-owned Golden Nugget properties will be turned into DraftKings sportsbooks.
The acquisition does not include Golden Nugget’s retail casinos.
DraftKings CEO Jason Robins said: “We anticipate that this acquisition will provide meaningful revenue uplift by utilising our data-driven marketing capabilities and a dual-brand iGaming strategy, gross margin improvement opportunities, and cost savings across external marketing. I am proud to welcome the GNOG team to the DraftKings family.”
DraftKings will integrate GNOG employees across its business, including president Thomas Winter, who will now become general manager of North America for iGaming at DraftKings.
GNOG reported a 40.7% revenue rise to $128.2m for full-year 2021 amid an annual operating loss of $30m.
“This will be an alliance unlike any other in the digital sports, entertainment and online gaming industry,” said Tilman Fertitta, chairman and CEO of GNOG.
“Now that the acquisition is completed, I look forward to what the future will bring for our combined company and I am confident this relationship will be a huge success.”
Fertitta also owns NBA franchise the Houston Rockets, which should grant DraftKings market access and branding opportunities in the state of Texas, if or when it regulates.
Raine Group served as exclusive financial advisers to DraftKings, while Jefferies served as lead financial advisers to Golden Nugget Online Gaming.
Speaking to Bank of America in March, DraftKings CFO Jason Park said: “The DraftKings brand just doesn’t resonate with that casino-first customer nearly as much as Golden Nugget does and we looked at multiple opportunities.
“We looked at building our own casino-first brand and we got very excited about the Golden Nugget brand. It’s a brand that resonates with a different demographic that we don’t have today,” he added.
Golden Nugget Online Gaming (GNOG) has reported a 40.7% revenue rise to $128.2m for full-year 2021 amid an annual operating loss of $30m.
The bulk of revenue was provided by the operator’s core gaming segment, which grew by 41.8% year-on-year to $113.4m.
Other, which encompasses market-access agreements, live dealer contracts and royalties, contributed the remaining $14.9m thanks to annual growth of 33%.
The revenue rise was driven by the launch of GNOG operations in Michigan in January 2021, while the operator also went live in Virginia and West Virginia during Q3 of that year.
This saw the cost of revenue increase by $24.7m, or 67.5%, to $61.2m due to increased gaming taxes and market-access fees as the firm expanded into new states.
The business slumped to an operating loss of $30m for 2021, compared to a $24.5m profit in 2020.
The two main drivers of this were a 253% uptick in advertising and promotion costs to $61.7m and a 247.1% increase in general and administrative expenses to $28.8m.
The rising marketing costs were almost entirely attributable to the operator’s Michigan launch, while stock-based compensation of $12m, compared to $0m in the prior year, was responsible for the jump in general and administrative expenses.
Elsewhere, M&A expenses rose by 53.1% to $6.3m as the company gears up to merge with DraftKings after agreeing to a $1.56bn all-stock offer from the betting operator in August.
That agreement has led to class-action lawsuits being lodged in a New York federal court after plaintiff investor Peter Wong claimed terms of the sale were unfair to shareholders.
If the DraftKings merger does not complete by 31 May 2022, which was automatically extended beyond the initial date of 28 February 2022, either party may choose to terminate the merger agreement.
Outlining potential risks to the business in its annual report, GNOG said the termination of the DraftKings agreement could negatively impact the company, resulting in a termination fee of $55m if the deal is terminated in connection with a material breach of obligations.
“If the DraftKings merger agreement is terminated and the company determines to seek another business combination or strategic opportunity, the company may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the DraftKings merger,” the report reads.
There is no indication that the merger will not proceed as planned. In fact, the deal is set to close this quarter and GNOG has already wheeled out a new DraftKings-powered sportsbook offering in Arizona.
DraftKings has acquired GNOG to expand its iGaming offering and diversify its product portfolio which is geared towards online sports betting and DFS.
During a recent fireside chat with Bank of America, DraftKings CFO Jason Park said: “The DraftKings brand just doesn’t resonate with that casino-first customer nearly as much as Golden Nugget does and we looked at multiple opportunities.
“We looked at building our own casino-first brand and we got very excited about the Golden Nugget brand. We will very likely maintain the Golden Nugget brand. It’s a brand that resonates with a different demographic that we don’t have today,” he added.
DraftKings’ share price has plummeted by 64% since the all-stock deal was agreed on 9 August 2021 to a closing price of $18.99 per share as of 17 March 2022.