|DRAFTKINGS STOCK STEADY ON IMPROVED REVENUE GUIDANCE DESPITE MASSIVE Q4 LOSSES|
POSTED ON FEBRUARY 26, 2021
BY BRAD ALLEN
Legal Sports Report
DraftKings stock climbed 4% on Friday following a strong Q4 earnings report and upgraded outlook for 2021.
The company posted Q4 revenue of $332 million, up 98% on a pro-forma basis and ahead of analyst estimates.
CEO Jason Robins said the revenue beat was driven by:
-- Good hold rates, especially on NFL
-- More college sports than initially projected
-- Remote registration in Ilinois
-- A strong launch in Tennessee, where the market saw over $300 million in handle in its first two months
-- People stuck at home with more time and money for betting
New guidance affects DraftKings stock
As a result, DraftKings raised its FY21 revenue outlook from $750-850 million to $900 million – $1 billion.
Robins said the improved outlook reflected “the outperformance of our core business and newly launched states that were not included in our previous guidance.”
There was also growth in existing states, with New Jersey handle up 103% year-on-year. DK said it was profitable in New Jersey in its second full year of operation there.
Elsewhere, monthly unique players increased 44% to 1.5 million, while average revenue per player increased 55% to $65.
Big costs for DraftKings
However, the growth came at a high cost. Net loss for the quarter was $266 million. Adjusted EBITDA was negative $88 million.
Much of the difference between the two numbers was driven by stock compensation during the quarter, which was $149 million.
As for costs, sales and marketing spend ramped up year-on-year to $192 million. However, it was down slightly on a sequential basis from $203 million in Q3. That’s because of the marketing ramp-up around NFL betting at the end of Q3.
The operator declined to share an EBITA outlook for 2021, based on the variance in new state launches. Investors remained largely unfazed by the company’s sizable spend, as DraftKings stock opened Friday at $60 and sat art $59.50 as of publication.
What next for DK?
Going forward, the company said the migration to its in-house SBTech platform should be complete by the end of Q3 2021. That will give it greater control over product development and boost margins, Robins said.
Other key takeaways:
DraftKings said it was the largest iGaming operator in the US by GGR in Q4
DraftKings registered more customers in Iowa in five days via mobile registration than through the entirety of 2020.
The company will host an investor day on March 9.
What do investors think?
Gaming investor Jason Ader played down the losses, saying the company was right to pursue growth while the sector was still early-stage.
“I’m not saying its a value stock, obviously it’s trading on a very high multiple,” Ader said. “But from a business perspective, they are executing at a very high level.”
He said DraftKings would be smart to make the most of its lofty valuation and issue equity to make an acquisition.
“Their stock is good currency right now and they should use that to strengthen their business,” Ader said.