DraftKings Earnings Preview: What Is Fueling Online Gains?

Written By

Updated on


DraftKings investors will learn more about the company’s recent strides toward the top of the online gaming heap when leadership discusses quarterly earnings.

The earnings report will come out after the market closes Thursday. That will give the market time to digest the details before DraftKings CEO Jason Robins addresses investors and analysts at 8:30 am Eastern Friday.

DraftKings stock is down 9% to below $28 since its Q2 report, but is still up 133% year-to-date.

What is driving DraftKings growth?

DraftKings has leads handle share in nascent markets like Ohio and Massachusetts for the better part of the year while gaining significant ground on FanDuel in New York, the largest active online sports betting state.

Is that because DraftKings continued to drive more customers toward parlays in the third quarter? Or will forthcoming state reports for September and October reveal inflated growth from promotional intensity at the start of the NFL betting season?

There will be plenty to learn from the report and from Robins.

Parlays, promos or both?

A higher parlay mix certainly played out in Q2, when DraftKings reported $137 in average revenue per monthly unique player, a 33% increase year over year. That metric contributed to the company’s first quarter without a loss and will be vital in telling the third-quarter story.

Q2 saw improved Adjusted EBITDA loss expectations of between $190 million and $220 million in losses for the full year. That was an improvement from from May guidance of between $290 million to $340 million in losses.

Revenue expectations also improved to $3.54 billion, about a 2.3% increase from prior guidance. DraftKings has advised between $150 million to $175 million in adjusted EBITDA in Q4.

The focus on Q4 margins as opposed to Q3 was somewhat expected because of more state launches and seasonal promotions. Expect Robins, however, to address recent developments in the industry and how those might affect expectations.

Will ESPN Bet, more states change picture?

DraftKings may be inclined to keep promotions higher longer than it usually would this time of year. Fanatics is pushing into new markets and Penn could disrupt the seasonal sign-up offer market later this month when it relaunches its online sportsbook under the ESPN brand.

ESPN Bet also means DraftKings is set to lose its marketing deal with the “Worldwide Leader.”

While recent deals positioned DraftKings to advance some of its product capabilities, ESPN Bet, Fanatics, and BetMGM each are expected to improve their pricing across key sports by the end of the year. Look for Robins to highlight recent parlay and in-play innovations made by partner Simplebet.

Expect leadership to also touch on Maine, where DraftKings will launch online sports betting. He likely will address farther-off launches in North Carolina and Vermont as well.