DraftKings Inc. (Nasdaq: DKNG) (“DraftKings” or the “Company”)
today reported its second quarter 2022 financial results.
Second Quarter 2022 Highlights
For the three months ended June 30, 2022,
DraftKings reported revenue of $466 million, an increase of 57%
compared to $298 million during the same period in 2021. Revenue
for the Company’s B2C segment grew to $455 million, an increase of
68% compared to the three months ended June 30, 2021,
notwithstanding a less favorable sports calendar in the second
quarter of 2022 compared to the second quarter of 2021. Revenue and
Adjusted EBITDA outperformed the midpoints of their respective
guidance ranges for the second quarter of 2022, which were
previously provided by DraftKings during its first quarter earnings
call on May 6, 2022 and included contributions from the Company’s
acquisition of Golden Nugget Online Gaming, Inc. (“GNOG”) and the
Company’s expected launch in Ontario (the “Q2 Guidance”), by more
than $30 million and by almost 40%, respectively. Results for the
three months ended June 30, 2022 include the operations of GNOG on
and after May 5, 2022, which is the date on which the GNOG
acquisition was consummated.
“DraftKings had an excellent second quarter,
exceeding expectations for revenue and Adjusted EBITDA,” said Jason
Robins, DraftKings’ co-founder, Chief Executive Officer and
Chairman of the Board. “Customer engagement remains strong, and we
continue to see no perceivable impact from broader macroeconomic
pressures. Due to our ongoing investments in core online gaming
technologies, we are in a strong position from a competitive
perspective as we approach the beginning of the NFL season. We
remain well capitalized, ready to enter new markets as they become
live, and confident in our ability to compete and win with
customers.”
“We executed very well in the second quarter and
outperformed the midpoints of the Q2 guidance ranges for revenue
and Adjusted EBITDA that we provided on our first quarter earnings
call,” added Jason Park, DraftKings’ Chief Financial Officer. “Our
B2C segment drove revenue growth due to stronger than anticipated
customer activity, while we continued to make progress on
identifying and capturing operating efficiencies. As a result,
looking forward, we are increasing the midpoint of our fiscal year
2022 revenue guidance by $15 million and improving the midpoint of
our fiscal year 2022 Adjusted EBITDA guidance by $60 million.”
Continued Healthy Growth in Player Retention,
Acquisition and Engagement
- Monthly Unique Payers (“MUPs”)
increased to 1.5 million average monthly unique paying B2C
customers, representing an increase of 30% compared to the second
quarter of 2021. This increase reflects strong unique payer
retention and acquisition across DraftKings’ Sportsbook and iGaming
products as well as the expansion of its Sportsbook and iGaming
products into new jurisdictions, partially offset by a decline in
Daily Fantasy Sports MUPs.
- Average Revenue per MUP (“ARPMUP”)
was $103 in the second quarter of 2022, representing a 30% increase
compared to the same period in 2021. This increase was primarily
due to strong customer engagement, a continued mix shift into
DraftKings’ Sportsbook and iGaming products and reduced promotional
intensity compared to the same period in 2021.
Raising Midpoint of 2022 Revenue Guidance and Improving
2022 Adjusted EBITDA Guidance
- DraftKings is raising its fiscal
year 2022 revenue guidance to a range of $2.08 billion to $2.18
billion from the range of $2.055 billion to $2.175 billion
previously announced on the Company’s first quarter earnings call
on May 6, 2022, which included contributions from the Company’s
acquisition of GNOG and the Company’s expected launch in Ontario
(the “Prior FY 2022 Guidance”). This updated 2022 revenue guidance
range equates to year-over-year growth of 60% to 68%.
- DraftKings is also improving its
fiscal year 2022 Adjusted EBITDA guidance to a loss of between $765
million and $835 million from its Prior FY 2022 Guidance of a loss
of between $810 million and $910 million.
- DraftKings’ updated guidance for
fiscal year 2022 revenue and Adjusted EBITDA includes all the
states and jurisdictions in which it was live as of August 5,
2022.
- Detailed financial data and other
information is available in DraftKings’ Quarterly Report on Form
10-Q, which will be filed today with the Securities and Exchange
Commission (the “SEC”), as well as in a slide presentation that can
be accessed through the “Investors” section of the Company’s
website at investors.draftkings.com.
Expanded Mobile Sports Betting and iGaming
Footprint
- DraftKings is live with mobile
sports betting in 17 states that collectively represent
approximately 36% of the U.S. population.
- DraftKings is also live with
iGaming in 5 states, representing approximately 11% of the U.S.
population.
- On May 18, 2022, DraftKings
launched its Sportsbook and iGaming products in Ontario,
Canada.
- Four of the U.S. jurisdictions
where DraftKings has the potential opportunity to operate via a
market access agreement or direct license – Maryland, Puerto Rico,
Ohio, and Kansas – have authorized mobile sports betting. These
four jurisdictions represent approximately 8% of the U.S.
population and, pending licensure and regulatory approvals, would
bring the percentage of the U.S. population where DraftKings
expects to offer legalized mobile sports betting to approximately
44%.
- During the second quarter, the
California Secretary of State confirmed that the online sports
betting initiative that DraftKings supports took another step
towards legalization by meeting the signature threshold to qualify
for the ballot in November 2022. Tribes, leading homelessness and
mental health advocates, and mayors of some of California’s largest
cities are publicly supporting this initiative. DraftKings is
cautiously optimistic about the ultimate outcome in November and
the potential to generate hundreds of millions of dollars to
address homelessness, mental health, and addiction in partnership
with the state’s Tribes.
- In Massachusetts, the legislature
passed a bill that, pending executive action, would legalize retail
and online wagering on professional and collegiate sports.
Massachusetts represents 2% of the U.S. population.
Product Functionality and Content
- In the second quarter, DraftKings
continued to expand the functionality and content offering of its
Sportsbook product, which the Company believes will help drive
customer acquisition, engagement, and retention. These enhancements
include new markets for Major League Baseball, such as wagers based
on pitch speeds and pitch counts per plate appearance, and same
game parlays for UFC® fights. In addition, the Company’s Sportsbook
product has launched several features to strengthen its parlay
offering - including parlay insurance, pre-packed same game parlays
and the capability to void an individual leg of a same game parlay
without voiding the entire parlay. DraftKings also plans to offer a
feature that will allow users to combine multiple same game
parlays.
- After a decade of innovation in
Daily Fantasy Sports, DraftKings is bringing its digital gaming
expertise and creativity to Web3 with the upcoming launch of a new
game, Reignmakers Football. This next generation, NFT-powered
fantasy football game is slated to debut on DraftKings Marketplace
for kickoff of the 2022 football season in an effort to position
the Company at the growing intersection of gaming and digital
collectibles. Reignmakers Football combines fantasy sports with
blockchain and techniques such as collecting and upgrading in a way
designed to appeal to traditional and new collectors of NFTs,
fantasy sports players, and fans of online and tabletop games. In
collaboration with the National Football League Players
Association, Reignmakers Football will feature tiered Player Card
NFTs of real athletes whose on-field performances will score points
within weekly lineups similar to Daily Fantasy Sports.
- In June 2022, the UFC® and
DraftKings announced plans to launch a new iteration of DraftKings’
Reignmakers gamified digital collectibles franchise focused on
UFC®. Reignmakers UFC® will allow fans to build NFT collections of
their favorite UFC® fighters and utilize those NFTs in games to
compete for prizes. Collectors may receive rewards both leading
into and following the game rollout based on the utility of the
NFT. Such rewards may include, among other things, entries into
special Daily Fantasy Sports contests for cash and custom
merchandise. Under DraftKings’ agreement with the UFC®, DraftKings
Marketplace will have access to intellectual property from over 500
different athletes on the active UFC® roster from which to choose
to create the Reignmakers UFC® collection.
- DraftKings continued to bolster its
network of leading influencers and talent and expand its original
programming - which is distributed on high reach platforms such as
Apple Podcasts, iHeartRadio, Spotify, Twitch and YouTube - by
announcing four new shows produced in coordination with Meadowlark
Media. Joining the line-up are “Too Many Men” featuring hockey
analysts Alison Lukan, Shayna Goldman and Sara Civian, “The
Cooligans” with Alexis Guerreros and Christian Polanco, college
football-focused “Shutdown Fullcast” hosted by Spencer Hall, Holly
Anderson, Jason Kirk, and Ryan Nanni, and “DNF” (Did Not Finish),
an F1 program with Jessica Smetana and Spencer Hall.
Environmental, Social and Governance
Initiatives
- In April, DraftKings published its
second Sustainability Report providing insights into the Company’s
commitment to environmental, social and governance (“ESG”)
initiatives, which is available here.
- DraftKings reached its goal of
funding the planting of 1 million trees by Earth Day 2022, in
collaboration with the Arbor Day Foundation and Gisele Bündchen,
the Company’s Special Advisor to the CEO and Board of Directors for
ESG initiatives. This tree planting initiative has been a global
effort, making an impact across 14 U.S. states and 8 countries, and
has supported the health and wellness of the surrounding
communities and populations.
- DraftKings continued its commitment
to training veterans and military spouses in high tech skills as
part of its Tech for Heroes initiative, with the Company planning
to train an additional 200 veterans and spouses in 2022. In the
second quarter, DraftKings also provided opportunities for its
customers to support veterans-focused organizations and programs
through charity-focused Daily Fantasy Sports contests and special
Sportsbook and iGaming promotions.
- DraftKings and BetBlocker, a
leading responsible gaming and safer play not-for-profit charity,
announced a collaboration to advance awareness of and access to
BetBlocker’s innovative responsible gaming software. BetBlocker
will allow DraftKings customers to set restrictions on their gaming
activities across all of their devices at no cost to the customers.
Such restrictions will apply globally across thousands of gaming
sites, whether regulated or not.
- In recognition of DraftKings’
outstanding commitment to social responsibility as it relates to
responsible gaming and its promotion and institution of effective
responsible gaming practices and culture, the Company’s Responsible
Gaming team received three awards at this year’s National Council
on Problem Gambling (“NCPG”) conference, including the NCPG
Corporate Social Responsibility Program of the Year.
Webcast and Conference Call Details
DraftKings will host a conference call and audio
webcast today at 8:30 a.m. EDT, during which management will
discuss the Company’s results for the quarter and provide
commentary on business performance. A question and answer session
will follow the prepared remarks.
To join the call live, participants must
register at https://edge.media-server.com/mmc/p/8exf4kqk or on
the DraftKings Investor Relations website. Once registered,
participants can join the call online or receive a dial-in number
and unique PIN to access the call. Please join approximately 5
minutes prior to the scheduled start time.
A live audio webcast of the earnings conference
call will be available on the Company’s website at
investors.draftkings.com, along with a copy of this press release,
the Company’s Quarterly Report on Form 10-Q, and a slide
presentation. The audio webcast and accompanying presentation will
be available on the Company’s investor relations website until
11:59 p.m. EDT on September 14, 2022.
Non-GAAP Financial Measures
This press release includes Adjusted EBITDA,
which is a non-GAAP financial measure that DraftKings uses to
supplement its results presented in accordance with U.S. GAAP. The
Company believes Adjusted EBITDA is useful in evaluating its
operating performance, similar to measures reported by its
publicly-listed U.S. competitors, and regularly used by security
analysts, institutional investors and other interested parties in
analyzing operating performance and prospects. Adjusted EBITDA is
not intended to be a substitute for any U.S. GAAP financial
measure, and, as calculated, may not be comparable to other
similarly titled measures of performance of other companies in
other industries or within the same industry.
DraftKings defines and calculates Adjusted
EBITDA as net loss before the impact of interest income or expense
(net), income tax provision or benefit, and depreciation and
amortization, and further adjusted for the following items:
stock-based compensation, transaction-related costs, litigation,
settlement and related costs, advocacy and other related legal
expenses, gain or loss on remeasurement of warrant liabilities, and
other non-recurring and non-operating costs or income, as described
in the reconciliation below.
DraftKings includes non-GAAP financial measures
because they are used by management to evaluate the Company’s core
operating performance and trends and to make strategic decisions
regarding the allocation of capital and new investments. Adjusted
EBITDA excludes certain expenses that are required in accordance
with U.S. GAAP because they are non-recurring items (for example,
in the case of transaction-related costs and advocacy and other
related legal expenses), non-cash expenditures (for example, in the
case of depreciation and amortization, remeasurement of warrant
liabilities and stock-based compensation), or non-operating items
which are not related to the Company’s underlying business
performance (for example, in the case of interest income and
expense and litigation, settlement and related costs).
The table below presents the Company’s Adjusted
EBITDA reconciled to its net loss, which is the most directly
comparable financial measure calculated in accordance with U.S.
GAAP, for the periods indicated:
|
Three months ended June 30, |
|
Six months ended June 30, |
(amounts in thousands) |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Net loss |
$ |
(217,103 |
) |
|
$ |
(305,526 |
) |
|
$ |
(684,796 |
) |
|
$ |
(651,870 |
) |
Adjusted for: |
|
|
|
|
|
|
|
Depreciation and amortization (1) |
|
42,315 |
|
|
|
30,051 |
|
|
|
74,540 |
|
|
|
58,244 |
|
Interest income, net |
|
(1,929 |
) |
|
|
(1,642 |
) |
|
|
(2,077 |
) |
|
|
(2,627 |
) |
Income tax (benefit) provision |
|
(81,226 |
) |
|
|
2,404 |
|
|
|
(80,757 |
) |
|
|
(2,191 |
) |
Stock-based compensation (2) |
|
135,521 |
|
|
|
171,739 |
|
|
|
322,598 |
|
|
|
323,582 |
|
Transaction-related costs (3) |
|
10,505 |
|
|
|
7,890 |
|
|
|
14,279 |
|
|
|
10,913 |
|
Litigation, settlement, and related costs (4) |
|
2,446 |
|
|
|
3,599 |
|
|
|
4,396 |
|
|
|
4,221 |
|
Advocacy and other related legal expenses (5) |
|
— |
|
|
|
11,035 |
|
|
|
— |
|
|
|
11,035 |
|
(Gain) loss on remeasurement of warrant liabilities |
|
(14,315 |
) |
|
|
(16,984 |
) |
|
|
(26,996 |
) |
|
|
9,996 |
|
Other non-recurring and non-operating costs (income) (6) |
|
5,652 |
|
|
|
2,132 |
|
|
|
(28,830 |
) |
|
|
4,133 |
|
Adjusted
EBITDA |
$ |
(118,134 |
) |
|
$ |
(95,302 |
) |
|
$ |
(407,643 |
) |
|
$ |
(234,564 |
) |
_________________________
(1) |
The amounts include the amortization of acquired intangible assets
of $27.1 million and $20.6 million for the three months ended June
30, 2022 and 2021, respectively, and $46.3 million and $39.7
million for the six months ended June 30, 2022 and 2021,
respectively. |
(2) |
Primarily reflects stock-based compensation expenses resulting from
the issuance of awards under long-term incentive plans. |
(3) |
Includes capital markets advisory, consulting, accounting and legal
expenses related to evaluation, negotiation and integration costs
incurred in connection with pending or completed transactions and
offerings. |
(4) |
Primarily includes external legal costs related to litigation and
litigation settlement costs deemed unrelated to DraftKings’ core
business operations. |
(5) |
Includes certain non-recurring costs relating to advocacy efforts
and other legal expenses in jurisdictions where DraftKings does not
operate certain products and is actively seeking licensure, or
similar approval, for those products. For the three and six months
ended June 30, 2021, those costs primarily relate to DraftKings’
activities in Florida. The amounts presented exclude other costs
relating to advocacy efforts and other legal expenses incurred in
jurisdictions where related legislation has been passed and
DraftKings currently operates. |
(6) |
Primarily includes the change in fair value of certain financial
assets, as well as the Company’s equity method share of the
investee’s losses and other costs relating to non-recurring and
non-operating items. |
Information reconciling forward-looking fiscal
year 2022 Adjusted EBITDA guidance to its most directly comparable
U.S. GAAP financial measure, net income (loss), is unavailable to
DraftKings without unreasonable effort due to, among other things,
certain items required for such reconciliations being outside of
DraftKings’ control and/or not being able to be reasonably
predicted. Preparation of such reconciliations would require a
forward-looking balance sheet, statement of income and statement of
cash flow, prepared in accordance with U.S. GAAP, and such
forward-looking financial statements are unavailable to the Company
without unreasonable effort. DraftKings provides a range for its
Adjusted EBITDA forecast that it believes will be achieved;
however, the Company cannot provide any assurance that it can
predict all of the components of the Adjusted EBITDA calculation.
DraftKings provides an Adjusted EBITDA forecast because it believes
that Adjusted EBITDA, when viewed with DraftKings’ results
calculated in accordance with U.S. GAAP, provides useful
information for the reasons noted above. However, Adjusted EBITDA
is not a measure of financial performance or liquidity under U.S.
GAAP and, accordingly, should not be considered as an alternative
to net income (loss) or cash flow from operating activities or as
an indicator of operating performance or liquidity.
About DraftKings
DraftKings Inc. is a digital sports
entertainment and gaming company created to fuel the competitive
spirit of sports fans with products that range across daily
fantasy, regulated gaming and digital media. Headquartered in
Boston, and launched in 2012 by Jason Robins, Matt Kalish and Paul
Liberman, DraftKings is the only U.S.-based vertically integrated
sports betting operator. DraftKings is a multi-channel provider of
sports betting and gaming technologies, powering sports and gaming
entertainment for operators in 17 countries. The Company operates
iGaming in 5 states through its DraftKings brand, as well as
operating Golden Nugget Online Gaming, an award-winning iGaming
product and iconic gaming brand, in 3 states. DraftKings’
Sportsbook is live with mobile and/or retail betting operations
pursuant to regulations in 18 U.S. states and in Ontario, Canada.
DraftKings’ daily fantasy sports product is available in 6
countries internationally with 15 distinct sports categories.
DraftKings is both an official daily fantasy and sports betting
partner of the NFL, NBA, MLB, NHL, PGA TOUR and UFC as well as an
official daily fantasy partner of NASCAR. Launched in August 2021,
DraftKings Marketplace is a digital collectibles ecosystem designed
for mainstream accessibility that offers curated NFT drops and
supports secondary-market transactions. DraftKings also owns Vegas
Sports Information Network (VSiN), a multi-platform broadcast and
content company.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995, including statements about the
Company and its industry that involve substantial risks and
uncertainties. All statements, other than statements of historical
fact, contained in this press release, including statements
regarding guidance, DraftKings’ future results of operations or
financial condition, strategic plans and focus, user growth and
engagement, product initiatives, the objectives of management for
future operations, and the impact of COVID-19 on the Company’s
business and the economy as a whole, are forward-looking
statements. In some cases, you can identify forward-looking
statements because they contain words such as “anticipate,”
“believe,” “contemplate,” “continue,” “could,” “estimate,”
“expect,” “forecast,” “going to,” “intend,” “may,” “plan,”
“potential,” “predict,” “project,” “propose,” “should,” “target,”
“will,” or “would” or the negative of these words or other similar
terms or expressions. DraftKings cautions you that the foregoing
may not include all of the forward-looking statements made in this
press release.
You should not rely on forward-looking
statements as predictions of future events. DraftKings has based
the forward-looking statements contained in this press release
primarily on its current expectations and projections about future
events and trends, including the current macroeconomic environment
(including the impact of the COVID-19 pandemic), that it believes
may affect its business, financial condition, results of
operations, and prospects. These forward-looking statements are not
guarantees of future performance, conditions or results, and
involve a number of known and unknown risks, uncertainties,
assumptions and other important factors, many of which are outside
DraftKings’ control and that could cause actual results or outcomes
to differ materially from those discussed in the forward-looking
statements. Important factors, among others, that may affect actual
results or outcomes include, but are not limited to, DraftKings’
ability to manage growth; DraftKings’ ability to execute its
business plan and meet its projections; potential litigation
involving DraftKings; changes in applicable laws or regulations,
particularly with respect to gaming; general economic and market
conditions impacting demand for DraftKings’ products and services;
economic and market conditions in the media, entertainment, gaming,
and software industries in the markets in which DraftKings
operates; the potential adverse effects of the current
macroeconomic environment (including the COVID-19 pandemic),
general economic conditions, unemployment and DraftKings’
liquidity, operations and personnel, as well as the risks,
uncertainties, and other factors described in “Risk Factors” in
DraftKings’ filings with the SEC, which are available on the SEC’s
website at www.sec.gov. Additional information will be made
available in other filings that DraftKings makes from time to time
with the SEC. The forward-looking statements contained herein are
based on management’s current expectations and beliefs and speak
only as of the date hereof, and DraftKings makes no commitment to
update or publicly release any revisions to forward-looking
statements in order to reflect new information or subsequent
events, circumstances or changes in expectations, except as
required by law.
Contacts
Media:
Media@draftkings.com
@DraftKingsNews
Investors:
Investors@draftkings.com
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