DraftKings Q1 losses rise 132% to $67m
SBTech costs also hit $7.5m on transaction costs relating to its three-way deal with DraftKings and Diamond Eagle
DraftKings (DK) recorded a net loss of $66.7m in Q1, an increase of 132% on the previous year due to its investment in SBTech and launching its IPO.
EBITDA loss increased to $49.5m from $20.4m last year despite a revenue uptick of 30% year-on-year and 60% pre-coronavirus.
The operator expects to incur further operating losses “for the foreseeable future,” according to an earning’s statement filed with the SEC.
“Going forward, the company may require additional financing in order to continue to develop its product and execute on its business plan,” it said.
“However, based on anticipated spend and cash received from the business combination and timing of expenditure assumptions, the company currently expects that its cash will be sufficient to fund its operating expenses, capital expenditure requirements and debt service payments for at least the next 12 months from issuance.”
Group CEO Jason Robins told investors the firm had pivoted to virtual sports and esports since the cancellation of live professional sports in the US in March.
During the period it launched a handful of new fantasy and betting products as well as more than 50 free-to-play pools to maintain customer engagement.
Robins said DK would continue to focus on virtual sports once live sports returned to maintain steadier player engagement between sporting seasons.
He said many players de-activated their accounts after the Super Bowl and dropped off between seasons.
DK’s monthly unique players increased by 100,000 YOY to 720,000 in Q1, while the average revenue per player also grew to $41.
The Boston-based group reported its DraftKings B2C revenues separately from SBTech, which also experienced a 30% profit loss in Q1 on transactional costs related to its combination with DK.
The supplier recorded losses of $7.5m during the period as it also increased investment in research and development and general costs.
Its revenue grew by 3% YoY to $24.4m although it was on an upwards growth trajectory of 19% before Covid-19 slowed sports betting globally.
Following completion of the deal, Robins said the group was focused on “high-quality migration” between its DK and SBTech tech stacks.
He expects the integration to be completed by mid to late 2021.
Regulus Partners analyst Paul Leyland said: “Unlike at least one of its major competitors, DK has invested in casino (an obvious cross-sell product and one that was outperforming sports betting in NJ as a profit centre even before Covid), which gives it a welcome hedge in the current disruption.
“It is also investing in esports betting and other alternatives, which is sensible in our view, if unlikely to come anywhere close to replacing US sports interest in the short-medium term.”
He added: “We are confident that US online sports betting will see a V-shaped recovery and this should be in time for the key events and trading period from September and DK is very well placed to benefit from this.
“However, as DK’s Q1 20 cost base shows, recovery to historical patterns is nowhere near enough to drive a profitable business.”