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DraftKings reports higher revenue and costs as you bet on growth

There are more states towards legalizing sports gambling, DraftKings Co., Ltd.

DKNG -5.01%

As entertainment becomes mainstream, we are confident that large investments in marketing will lead to massive growth for our customers.

The Boston-based sports betting platform on Friday recorded a significant year-over-year increase in revenue and user base, benefiting from the platform’s rollout in more states. However, as DraftKings spent more on marketing, profits were significantly higher and losses increased.

DraftKings executives said higher marketing spending is important to raise customer awareness of the platform as sports betting becomes legal in more places. DraftKings losses are likely to surge further in the summer months, Chief Financial Officer Jason Park said the company will begin full-season football betting in three new states.

“The net effect is to continue to expect to spend significantly more on sales and marketing in 2021 compared to 2020,” Park said.

In the first three months of this year, DraftKings’ active monthly paying users have more than doubled from the previous year to 1.5 million. Average monthly revenue increased by 49%, and the company’s total revenue increased from $ 113.4 million in the previous year to $ 312.3 million.

At the same time, sales and marketing costs quadrupled year-over-year to $ 228.7 million. General and administrative expenses also increased, rising from $ 39.1 million in the previous year to $ 169 million.

As a result, the company’s quarterly losses surged. With the temporary items removed, interest, taxes, depreciation and pre-amortization adjusted losses were $ 139.3 million, compared with $ 51.6 million in the previous year. Shares fell 0.7% to $ 51.51 on Friday morning.

The growth of the company’s users has overcome the expanding market trend amid changes in the earthquake in the way sports betting is regulated nationwide. The US Supreme Court kicked off a wave of state sports betting legalization in 2018, when it ruled New Jersey in a case that revoked a federal ban on such activities.

Thanks to recent legalization, DraftKings launched mobile sports betting in Michigan and Virginia in the first quarter of this year. These new markets are part of the rationale that DraftKings quoted Friday in raising guidance for the year, with revenues of $ 1.05 billion to $ 1.15 billion expected in 2021. I will.

In April, New York became one of the latest states to pass plans to legalize mobile sports betting, aiming to select two companies through the bidding process later this year to operate online betting in the state. I am.

“We wait, when [request for proposals] Come out, what it looks like, and we’ll do our best, “CEO Jason Robins told analysts Friday.

The New York move is an example of how competitive pressures between states and falling tax revenues due to the coronavirus pandemic are leading the legislature to choose legalized sports gambling.

Since the 2018 Supreme Court ruling, more than half of the states have legalized sports gambling. New York State Legislatures cited losing income to neighboring states as part of the grounds for legalization.

“We believe the prospects for further legalization are very promising,” Robins said.

As the legal situation changed, one way to increase user engagement was in partnership with sports leagues, which until recently had avoided gambling relationships. Increasingly, league and team owners see gambling as a way to raise fan interest.

Andrew Rurstgarten, CEO of Madison Square Garden Sports Corporation, said in a statement prepared this week that “the recent legalization of mobile sports games in New York has been fan involvement, sponsorship, and It provides a meaningful opportunity for the value of the team. ” Reported earnings for the most recent quarter. MSG Sports owns the New York Knicks and the New York Rangers.

DraftKings has become a sports betting partner in the National Football League, a contract that allows sports betting content to be integrated into the NFL website and apps. He also recently expanded his contract with the PGA Tour of Golf and planned to operate an on-site betting facility at TPC Scottsdale, Arizona’s prestigious golf complex.

Write to Matt Grossman at matt.grossman@wsj.com

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DraftKings reports higher revenue and costs as you bet on growth

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