With more players, in more states, placing more online sports bets than ever, DraftKings closed the books on a record fourth quarter and full year Friday (Feb. 26), while raising expectations for 2021 and predicting it could do $1 billion in revenue.
Officially, the Boston-based gaming firm reported a 98 percent increase in Q4 revenues to a better-than-expected $322 million. At the same time, the costs involved in rapidly expanding into new markets and acquiring new customers, as well as significant stock-based compensation costs, led to an adjusted loss for the quarter of $87 million, or $0.24 per share, which was still only about half the deficit analysts predicted.
As far as 2021 goes, DraftKings said it has already entered two new state markets this year in Michigan and Virginia, as well as the addition of Tennessee in Q4, and was raising its full year sales outlook by about 20 percent to a range of $900 million to $1 billion, which it said equates to year-over-year growth of 40 to 55 percent.
“Looking ahead, I remain very confident in the continued growth of the online sports betting and iGaming markets in the US,” DraftKings CEO and Co-Founder Jason Robins told investors on the company’s earnings call. “Even in a market like New Jersey where we’ve been live for 2.5 years, substantial growth continues. Our handle in New Jersey grew over 100% in 2020 and we are profitable in the state despite the impact of the COVID pandemic.”
Bigger Bets
DraftKings is not only entering new states as they approve sports betting, but it is also growing through affiliation and sponsorship deals with a number of prominent leagues and event organizers, including the NFL, MLB and the PGA as well as the Mike Tyson-Roy Jones Jr. fight.
As it stands, DraftKings reported improvement in two key metrics; its Monthly Unique Payers (MUPs) increased 44 percent in Q4 with an average of 1.5 million paying players each month.
At the same time, its average revenue per user rose to $65, marking a 55 percent increase for the fourth quarter and a 29 percent increase for the year.
The company said its full year forecast assumes that all professional and college sports calendars that have been announced come to fruition, and that it is able to continue operations where it is currently doing business.
“DraftKings is now live with mobile sports betting in 12 states, which is more than any other company in the industry,” the company said in its earning presentation. “These 12 states together represent 25% of the US population” and come less than three years after the U.S. Supreme Court’s landmark 2018 decision that struck down a federal ban on sports betting that had stood for 25 years.
Growth Areas
DraftKings said the outlook for further legalization also looked very promising, noting that so far in 2021, 19 state legislatures have introduced legislation to legalize online sports betting, and five states have filed bills that would expand existing sports wagering frameworks.
As part of its ongoing expansion, the company said it is also in the midst of a tech migration that will enable it to use its own in-house betting technology. At the same time, DraftKings told investors that it is continuing its efforts to add new products, content initiatives and business relationships.
“I am pleased with the progress we are making with our organizational integration and the migration to our proprietary in house back-end and trading technology,” Robins said, noting a completion date target for the end of Q3. “Owning our own technology is important and will help with innovation, speed to market, site stability and availability of markets. We will also realize gross margin synergies associated with the migration starting in the fourth quarter of this year.”
As far as investors are concerned, DraftKings has been a homerun since its reverse merger listing last April via the SPAC Diamond Eagle Acquisition Corp. Since then, its shares have risen about 250 percent to value the company at over $25 billion.
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