DraftKings Stock Goes Green Despite Missed Q3 Earnings

Posted on November 5, 2021
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Written By on November 5, 2021

DraftKings stock ticked higher Friday despite the company missing its Q3 earnings projections.

The stock initially fell 9% in pre-market trading after the earnings print, but erased those losses and flipped green after a call with analysts.

$DKNG was up 2% to $45.40 at time of writing.

DraftKings Q3 numbers

Q3 revenue climbed 60% year-on-year to $213 million. That was below a consensus forecast of $231.5 million.

However, DraftKings noted revenues were hit by a string of adverse NFL betting results. Without those, revenue would have been $25 million higher, the company said.

State-by state-data suggested DraftKings held around 4.2% of bets, compared to a long-term average of around 6.25%. Losses were also higher than expected with adjusted EBITDA of -$314 million.

The operator spent $304 million on sales and marketing during the quarter.

Positive trends for DraftKings beyond stock

However, the content of the Q3 earnings call appeared to allay investor concerns.

For one, CEO Jason Robins said hold would be boosted going forward by items like same-game parlays. NFL results were also much friendlier in October

Robins also said the transition to the SBTech platform was boosting betting activity by more than 20% among existing customers and encouraging more parlay bets.

Elsewhere, DraftKings increased its share of online sports betting handle from 31% in July-August to 33% in September. That might have been inflated by the lower hold rate.

Hot start in the desert

Out west, DraftKings also reported record results from Arizona sports betting.

The company said it acquired more than 100,000 Arizona customers in 17 days. That was around eight times quicker than it took in New Jersey.

“It just blew us away,” Robins said.

He said the acquisition rates meant DraftKings invested more than expected on promos.

Source: DraftKings Q3 2021 presentation

What really happened with Entain?

Elsewhere, DraftKings fielded multiple questions on Entain, with analysts keen to figure out exactly why the approach was made in the first place.

Robins stressed the talks were always early-stage but said international expansion was a driving factor.

“We think global expansion is a key pillar for long term growth,” he said. “We thought this could be a good route. Entain is a great asset but there are other interesting international assets.”

As for why the deal fell through, Robins added: “Value was one reason. Another was deal complexity. But it was more about our confidence in the US strategy and a desire to focus on the US.”

He did not mention Entain’s technology that powers BetMGM.

Notes from DraftKings Q3 earnings call

  • B2B revenue from SBTech fell 19% to $24 million. That was driven by the termination of a reseller contract in Asia.
  • Robins said DraftKings would be able to achieve similar profit margins in New York as in other states. He said DraftKings would have to cut marketing and promo spend to do so.
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Brad Allen

Brad has been covering the online gambling industry in Europe and the US for more than four years, most recently as the news editor at EGR Global.

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