DraftKings Sportsbook Likely To Rebound Big In Latter Part of 2020

Posted on May 22, 2020

DraftKings, which launched its live sportsbook app in Iowa in February, reported a $74 million first quarter net loss on an earnings call last week. It was DraftKings’ first earnings call as a public company after merging with platform provider SBTech.

The loss does not come as a surprise, and CEO Jason Robins said future plans shouldn’t be impacted unless the COVID-19 pandemic prevents sports from returning by 2021. DraftKings operated in five new jurisdictions this first quarter compared to last year – Iowa included – which meant substantially more sales and marketing expenses. The cost of revenue for just DraftKings jumped 101.4% to $43.4 million during the quarter as a result, though operating costs will drop once DraftKings migrates to the SBTech platform.

And the betting handle in Iowa, like everywhere else, was significantly down in April and figures to look similar for May. In November 2019 through February 2020, Iowa’s state-wide betting handle never dipped below $56.9 million. In March it fell to $19.6 million – and plummeted all the way to $1.6 million in April.

 

Positive trends

DraftKings was trending towards an excellent quarter before the pandemic swept across the country. Through March 10, its net revenue was up 60% but ended the quarter up 30% instead. SBTech, meanwhile, was up 19% but closed out the quarter up 3%.

With that said, DraftKings’ stock is on the rise thanks to bets on eSports, table tennis and Korean baseball. It currently trades at about $30 per share, up from $17.53 a share on April 23. ESports has potential to stick around even when traditional sports return, in Robins’ opinion.

“Esports was really small for us until, you know, about two months ago,” Robins said in a “Mad Money” interview. “Really, it was the only thing for a little while that people were still playing.

“It’s been a huge growth area over the last couple months for us and [it’s] hard to say what it will look like once the traditional sports are back, but I think a lot of people are finding it fun.”

We don’t have all of the data or details, but we know DraftKings’ iGaming figures at Resorts Digital, its New Jersey partner. Resorts Digital saw iGaming revenue jump 125.8% to $16.1 million from March to April, and May is on a similar track, according to Robins. And the DraftKings Sportsbook launch in Colorado and iGaming launch in Pennsylvania have been in line with or better than what was expected.

 

Boom period lies ahead

There is also reason to believe betting and daily fantasy interest will soar if sports are able to return in the coming months. A proposal is on the table for the MLB to return in early July, which needs to be agreed upon by MLB players and owners. An NBA return appears to be gaining steam, as well, though there’s not as clear of a timeline in place. DraftKings did big numbers for the NFL Draft and recent UFC events, and Robins believes it’s an indicator for what’s to come.

“I think what it shows you is there’s a lot of pent-up demand for sports,” Robins said. “People are hungry for sports to come back.”

And while DraftKings is venturing into the sports betting industry, daily fantasy sports is still its primary customer acquisition channel, according to Robins. DraftKings had 720,000 monthly unique paying customers in the first quarter across DFS, sportsbook and casino. That’s up 16.3% from last year. The average revenue per monthly unique payers also rose 10.8% to $41.

So while DraftKings would be in an even more advantageous spot right now had COVID-19 never happened, its future remains undeniably bright.

Joe Boozell Avatar
Written by
Joe Boozell

View all posts by Joe Boozell