DraftKings shares fell on Friday morning as the company posted a mixed set of Q2 results.
The Nasdaq-listed sportsbook operator beat revenue forecasts with $71 million in Q2 vs consensus estimates of $64.4 million.
However net losses for the quarter were worse than expected at $161 million. That equated to a loss per share of $0.55 compared to a consensus of -$0.20.
Strong balance sheet for DraftKings
However, DraftKings stressed it was debt-free with $1.2 billion in cash on its balance sheet.
“The company is well-positioned to continue to deliver on its key priorities, which include entering new states at the earliest opportunity, investing in product and technology to create new offerings for American sports …and acquiring and retaining customers,” DraftKings said in its earnings report.
Management also introduced a bullish revenue guidance for FY2020 of $500 million to $540 million.
That equates to year-over-year pro forma revenue growth of 22% to 37% in the second half of 2020.
The guidance assumes the professional sports calendar remains “as currently contemplated” and that DraftKings operates in the states in which it is currently live.
Best tech will win the US betting market
“We believe that the best product will ultimately win with the American consumer,” said DraftKings CEO Jason Robins.
“As a technology-first organization, we will continue to focus on bringing new and innovative products to market that strengthen our engagement with customers and maintain our competitive differentiation.”
DraftKings stock was down 6% to $33.90 as of 8:35 a.m. EST.
Jefferies analyst David Katz said the quarterly results were less relevant than the bullish guidance for 2020.
He maintained his “buy” rating on the stock with a $55 price target.
More deals in the pipeline?
In an investor call this morning, Robins said the company remained on track to migrate to its proprietary platform “no later than” September 2021.
He also said the company’s strong balance sheet enabled it to continue exploring “opportunistic M&A”.
When asked what sort of target DK had in mind, Robins did not point to anything specific. Rather, he said the recent economic turmoil could throw up some interesting assets.
“We don’t have much of a brick-and-mortar presence, so the impact of stay-at-home is actually more of a positive for us as long as sports are being played” Robins said.
“We think we could find some companies, whether directly operating in the space or on the partner and vertical integration side, where there’s good value there.”
However he stressed there was no need to make any moves with DK satisfied it has the core platform components in place following the SBTech deal.
Robins added: “The other thing I would say is that we are also very bullish on the overall market. And if we can find assets that are very complementary as we grow our core businesses, that’s potentially attractive as well.”