DraftKings issued today its first quarter financial results after the tie-up with SBTech, posting $113.4 million in revenue and a net loss of $74 million. Despite worse than expected, these results did not affect buying appetite of investors, with DraftKings shares up more than 10% at one stage during the trading day.
First Quarter Revenue Up
The combined entity that created “the only vertically integrated sports betting company based in the US”, reported nearly $500 million in cash and cash equivalents, and with less marketing spend due to the fewer sports events, DraftKings can easily limit cash burn rate within $20 million per month, in case sports comeback is further delayed.
“We are uniquely positioned at the intersection of digital sports entertainment and gaming in a rapidly growing industry.”
Jason Robins, Co-Founder, CEO and Chairman of the Board, DraftKings
Despite the major halt in all sports events around the globe, DraftKings recorded 30% increase in revenue year-on-year, responding to the lack of sport by creating new products to keep customers engaged, such as fantasy sports and betting on eNASCAR, Counter Strike, and Rocket League. In addition, the company introduced a series of free-to-play pools that cover topics of public interest ranging from political debates to popular TV shows.
Revenue for both DraftKings and SBTech was soaring year-on-year before the health crisis impact, 60% for the daily fantasy and sports book operator and 19% for the technology provider, but they both ended the quarter on the low, SBTech’s growth limited to 3%.
Focus on Expansion
Despite the increased revenue, cost of revenues for the company more than doubled during the quarter, with around half of it due to taxes and revenue sharing agreements in the new markets, and the other half being platform fees, which will diminish as soon as DraftKings migrates its sports betting to the SBTech’s platform, expected to happen mid- to late 2021.
DraftKings reported progress on its key priorities despite the effects of the ongoing health crisis, focusing on entering new states, investing in product and technology to create more unique offerings, acquiring and retaining customers. For Q1, the company launched retail and online sports betting in Iowa and went live with iGaming in Pennsylvania and online sports betting in Colorado.
DraftKings did not go into details as to what the financial result from the launch of online casino in Pennsylvania was, instead pointing out to New Jersey recent figures, where its iGaming partner, Resorts Digital, saw revenue jump by 125%.
With currently at least 14 states considering passing legislation to allow wagering on sports, DraftKings firmly believes momentum around legalization of sports betting to continue, looking to maximize on the its already strong position in a fast growing market. The company pointed out it will enter as early as possible into any new market that is legalized, keeping a closer look at Illinois, Michigan, Tennessee and Virginia.