DraftKings Announces Q2 Earnings: Report $298 Million in Q2 Revenue
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On Friday morning, DraftKings had its Q2 earnings call with investors to report its financial results from the quarter. As a result of strong earnings, the DraftKings stock (NASDAQ: DKNG) is up over 3% on Friday. DraftKings reported revenue of $298 million in Q2, an increase of 320% compared to the same period in 2020. It also increased its 2021 revenue guidance from the ranges of $1.05 billion to $1.15 billion, to $1.21 billion to $1.29 billion; that’s a year-over-year growth of 88-100% with a 14% increase from what was originally projected. DraftKings was also able to grow monthly unique players by 281% and average revenue per monthly unique payer by 26%, according to CFO Jason Park.
DraftKings Expanding Reach
DraftKings is now live in 12 states including Virginia, Michigan, Indiana, Iowa, New Hampshire, New Jersey, Pennsylvania, West Virginia, Tennessee, Illinois, and Colorado. Those states represent 25% of the United States population. Another six states have authorized mobile sports betting this year including Arizona, Connecticut, Louisiana, Maryland, New York, and Wyoming; those states represent 13% of the US population and will be significant markets for DraftKings to grow into.
Executive Comments
Jason Robins, DraftKings Co-founder, CEO, and Chairman of the Board spoke about DraftKings’ “particularly strong second quarter of 2021” and how it has been able to maintain impressive financials while “advancing into new areas, such as media and NFTs. We believe these expansion opportunities will enable us to further grow our customer base and generate additional revenues through cross-selling to our existing players.”
Corporate Partnership
Earlier this week, DraftKings announced a multi-year sports data supplier agreement with Genius Sports which will provide DraftKings with access to global sports data and content including player statistics and advanced metrics. DraftKings will also have access to Genius’ back-end player acquisition and retention solutions. Back-end migration was a major focus for DraftKings during Q2 as it worked to integrate several software firms which have been acquired in recent years.
DraftKings is in the process of migrating over to the SBTech platform, a process that has been completed in 11 of its 12 states. The final state, Virginia, should see migration completed by the end of Q3. DraftKings also launched its same-game parlays last week through partnerships with Betgenius and Sportcast. Major competitor FanDuel has seen lucrative success through its same-game parlay offerings, so this is a significant development for DraftKings.
Concerns Over Expenses
Some investors have reported concerns over the amount of cash spent by DraftKings on marketing and other expenses. In Q2, DraftKings reported an operating loss of $325.5 million compared to $153 million for the same period in 2020 and $325 million in Q1 2021. $171 million was spent on marketing during the quarter, and while DraftKings did retain $2.6 billion in cash on hand at the end of June, their expenses continue at a concerning rate. However, with the NFL season starting in September, DraftKings should see a significant increase in revenue in the near future.
Increased Hold the Cure to Cash Burn?
Per Action Network, “hold in sports betting refers to the percentage of money that sportsbooks keep for every dollar wagered.” DraftKings could continue to increase its revenue through the hold it mandates through its wagers, although that would result in worse odds for bettors and less competitive promotions. Jason Robins stated that the company isn’t “trying to maximize hold at this point” and is instead “more focused on getting people onto the platform.” $40 million was added to DraftKings revenues in H1 from the hold rate. Same-game parlays could boost hold and therefore revenue in the coming months, as well.
