DraftKings’ full-year revenue for 2020 finished up 49.0%, after the daily fantasy and sports betting operator ended the year by almost doubling revenue in the fourth quarter, though costs also grew significantly.
On a like-for-like basis, revenue for the three months to 31 December 2020 grew 146.1% year-on-year to $322.2m. If prior year figures from Diamond Eagle Acquisition Corp (DEAC) and SBTech were factored in, revenue grew 98.2% on a proforma basis.
The combination with special purpose acquisition company DEAC and SBTech saw DraftKings list on the Nasdaq Stock Exchange in April 2020.
DraftKings chief executive Jason Robins explained that a favorable sporting calendar in Q4, as well as strong marketing execution, helped the operator generate “tremendous” customer acquisition and engagement.
“In the fourth quarter of 2020, we saw [Monthly Unique Players (MUPs)] increase 43.9% to 1.5m and [average revenue per monthly unique player (ARPMUP)] increase 54.8% to $65,” he said.
The fourth quarter saw the business continue to expand, rolling out mobile betting in Tennessee. DraftKings noted that the state had the best two-month launch in the US to date, with over $300m staked across November and December.
A number of commercial and strategic agreements were also struck during the quarter. Perhaps most notable among these was an agreement with the Mashantucket Pequot Tribal Nation and Foxwoods Resorts Casino that sees the brand gain access to Connecticut’s sports betting market when regulation permits.
On the B2C side, it also announced agreements with Turner Sports, the Philadelphia Eagles, the Detroit Pistons, Nashville Predators and its first golf partnership, with professional player Bryson DeChambeau.
The legacy SBTech B2B business, meanwhile, rolled out a new sportsbook for PalaceBet, a brand operated by South Africa’s Peermont Hotels, Gaming and Resorts, and extended its partnership with Mansion Group’s MansionBet brand.
However, the business’ rapid growth was accompanied by a sharper rise in operating costs. Expenditure more than doubled across all segments, including marketing spend of $192.0m (up 205.3%); cost of revenue jumping 142.9% to $159.3m; and product and technology expenses growing from $7.4m in the prior year to $66.1m.
This resulted in the business’ operating loss widening to $268.3m. Adjusted loss before interest, tax, depreciation and amortisation, meanwhile, came to $87.9m. Once financial items and income taxes were factored in, DraftKings’ net loss for the fourth quarter came to $266.4m.
The operator’s strong fourth quarter performance has prompted it to raise its 2021 revenue guidance from a range of $750m to $850m, to the $900m to $1bn range.
This, it said, was based on its 2020 growth, coupled with new state launches – such as Michigan and Virginia – in January 2021, and the assumption that all scheduled sporting seasons could run without interruption.
Should 2021 revenue fall within this range, it would suggest year-on-year growth of between 39.9% and 55.4% from the $643.5m generated in the 2020 calendar year.
This, in turn, represented a 49.0% pro forma improvement on DraftKings’ 2019 fiscal year.
On a like-for-like basis – in which the contribution from SBTech is not factored into full year results, and 2020 revenue only included from 24 April, when the acquisition closed, revenue came to $614.5m, up 90.0% from 2019.
This split into $517.6m from DraftKings’ B2C daily fantasy, igaming and sports betting operations – up 68.0% – and $75.6m from the legacy SBTech business. A further $21.3m came from other sources.
The vast majority of revenue was generated in its native US, which accounted for $544.5m of the total, while most of the B2B revenue came from other international markets, which contributed $70.1m.
As with Q4, growth in costs outstripped that of revenue. The largest single outgoing was sales and marketing expenditure, at $499.3m, while cost of revenue climbed to $377.2m. This again saw DraftKings’ pro forma operating loss widen, to $850.0m. Loss before interest, tax, depreciation and amortisation came to $395.9m.
After financial items and taxes, DraftKings’ net loss amounted to $855.2m, up from $174.0m in the prior year.
Looking forward, the business said 2021 was off to a successful start. The launch of mobile registration in Iowa from 1 January saw it sign up more players remotely by 5 January, than it had in-person for the entirety of 2020.
Its January rollouts in Michigan and Virginia, meanwhile, mean it now offers mobile wagering in 12 states. Not only is this more than any other competitor, it said, but it covers an area representing around a quarter of the US population.
This market is set to grow further in 2021, it continued, with 19 state legislatures having introduced online sports betting bills to date. A further five are considering proposals to expand their sports betting frameworks, while another is exploring a bill to allow legal in-person betting.
In addition, four states have introduced igaming legislation and two states have introduced online poker legislation.
Shares in DraftKings were trading down 4.10% at $57.81 per share in New York on Friday (26 February) afternoon.