No Sports, No Problem: Investors Roll the Dice on DraftKings
Photo Credit: DraftKings website
Q1 earnings reported on 5/15: DraftKings recorded standalone revenue growth of 30%, despite the cancellation of global sporting events related to COVID-19 that began in Mid-March. Prior to the outbreak, Q1 revenue was up 60%. Monthly Unique Players reached 720,000, up 16% from a year ago. DraftKings said it does not anticipate an impact to FY2021 or long-term plans due to the pandemic.
Content expansion: In an effort to compensate for the absence of legacy sports, DraftKings has developed new content for its players to bet on. Post-COVID-19, the company introduced products such as fantasy sports and betting on Korean baseball, table tennis, and eSports. DraftKings also created free-to-play contests for TV shows such as Survivor and ESPN’s The Last Dance.
Source: DraftKings Q12020 earnings presentation
Growing footprint: The national lockdown has not prevented DraftKings from entering new markets. The company debuted its online casino in Pennsylvania on May 4 and launched mobile sports betting in Colorado on May 1. In Q12020, DraftKings rolled out retail and online sports betting in Iowa.
“At this time, approximately 14 U.S. states are actively considering sports betting legislation and DraftKings expects this momentum to continue as governments begin to focus on reopening the economy.” - company earnings release
“Eight states covering 13.6% of the US population have legalized OSB (online sports betting) in some form; we see this expanding to ~65% by 2026.”-Canaccord Genuity
Waiting for the return of sports: DraftKings shared in its Q1 earnings report it has the ability to manage monthly cash burn to $15-20M with no major sports and has $450M of cash on balance sheet with no debt. While eSports, simulated Madden games, and table tennis have provided short-term relief for DraftKings, the company’s near-term growth hinges on the return of major sports leagues. Here are some of the latest plans:
Bundesliga: set return date of May 16.
Nascar: set return date of May 17.
Major League Soccer: eyeing summer tournament in Orlando, according to The Athletic. The Athletic’s sources say the league proposed teams begin training on June 1 before resuming play on June 22.
NBA: commissioner Adam Silver told team owners this week that he is aiming for a decision in 2-to-4 weeks about whether to resume the season or cancel, according to The Athletic.
Big Picture: Mobile betting is at the center of sports betting, and DraftKings’ first-mover advantage puts the company in a strong position to win future market share from traditional casino operators as more states give online sports betting the green light.
