DraftKings Reports Net Loss Of $350M in Q3, But Stock Jumps 10% On Growth

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DraftKings Q3 results

You’ve got to spend money to make money. That seemed to be the philosophy at DraftKings during Q3, where the company grew revenues by 98% year-on-year to $133 million.

According to the company’s Q3 report, DraftKings also grew monthly unique payers (MUPs) by 64% to over one million. But the aggressive expansion wasn’t cheap.

The company spent $203 million on sales and marketing, up around 250% on the same period in 2019.

That led to a net loss of nearly $348 million during the quarter.

DraftKings stressed it had upped marketing spend to make the most of the customer demand it saw throughout the quarter and to support launches in new states.

DraftKings shares climbed 10% pre-market to $45.

‘Tremendous engagement’ for DraftKings

“The resumption of major sports such as the NBA, MLB and the NHL in the third quarter, as well as the start of the NFL season, generated tremendous customer engagement,” said Jason Robins, DraftKings’ CEO.

“Our product offerings and scalable platform provide a distinctive and personalized experience for customers across the ten states where we operate mobile sports betting today, and we look forward to entering additional jurisdictions at the earliest opportunity.”

Average revenue per monthly unique payer (ARPMUP) was $34. DK said that was lower than expected, due to limited sports activity in July and atypical hold rates from NFL wagering through the third week of the season.

However, that was partially offset by increased engagement with iGaming.

For comparison, FanDuel Group this week reported Q3 revenues of $212 million. That figure contains Fox Bet as well as TVG horse racing revenue. FanDuel Group also reported 1.8 million active users during the quarter.

Raised guidance for DraftKings

Looking ahead, DraftKings raised its 2020 pro forma revenue guidance from a range of $500 to $540 million to a range of $540 to $560 million.

That assumes no further major changes to the sports calendar.

What we learned from the $DKNG investor call

The follow-up analyst call was a little light on detail, with Robins focusing on the long term outlook for things like product.

“We are in the first innings here,” Robins pointed out. He said there would be more innovation around in-play betting when DK moves onto its own SBTech platform. That should be completed by Q3 2021.

Elsewhere, he tried to dampen expectation for TN sports betting, saying the minimum hold rate would make it hard to compete with the black market. He also said DFS was still growing, with Masters entries up significantly year-on-year. Although, that could be a function of people having money in their accounts for NFL.

Finally, DK currently has around $1.3 billion on the balance sheet, which could be used for M&A, as well as general marketing activity. Robins said they had no specific acquisition target in mind.