DraftKings has raised its earnings guidance for the year after its net loss declined on a year-on-year basis for the first time since going public, as revenue continued to rise while costs began to plateau.
During the second quarter of 2022, revenue came to $466.2m, which was up by 57.1% year-on-year.
Almost all of this total – at $454.7m, up 68.2% – came from its B2C operations, with the remainder coming from the legacy SBTech B2B business, where revenue declined sharply.
The increase, DraftKings said, came despite “a less favorable sports calendar in the second quarter of 2022 compared to the second quarter of 2021”.
Almost all of DraftKings’ revenue came from the US, at $456.1m. The B2C business had 1.5 million monthly unique players during the quarter, up from 1.1 million a year earlier. These customers contributed an average of $103 worth of revenue, up from $80 in Q2 of 2021, and was much higher than the $67 recorded in Q1.
Revenue was also ahead of the midpoint of the operator’s projected range for the figure, which was $435m.
Revenue for the quarter included Golden Nugget Online Gaming (GNOG) for the first time, after DraftKings acquired the business in May. It also included revenue from Ontario, where DraftKings launched in May.
Costs were also up year-on-year, but more slowly than revenue, and were down quarter-on-quarter.
Costs of revenue were the largest expense, at $312.8m, which was up 67.2% year-on-year. Sales and marketing costs – which had skyrocketed in past quarters to as much as $321.5m in Q1 – were up by just 15.7% to $197.5m.
DraftKings chief financial officer Jason Park said the operator had worked to find areas in which it could be more efficient.
“Our B2C segment drove revenue growth due to stronger than anticipated customer activity, while we continued to make progress on identifying and capturing operating efficiencies,” he said.
Product and technology costs also grew to $77.2m, while general and administrative costs declined to $187.6m.
These expenses included $135.5m worth of stock-based compensation, which was down from $171.7m in stock-based costs in Q2 of 2021.
As a result, the business made an operating loss of $308.9m, but this was less than the loss it reported in Q2 of 2021.
After other costs such as interest and remeasurement of the fair value of warrants to purchase its share, DraftKings made a pre-tax loss of $298.3m, down by 1.5%.
The business then received an $81.2m tax benefit, for a final loss of $217.1m, 29.9% lower than its loss a year earlier.
This marked the first time since going public that DraftKings has reduced its loss from the previous year.
The business also reported adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of negative $118.1m, which was also better than projected.
“DraftKings had an excellent second quarter, exceeding expectations for revenue and adjusted EBITDA,” said DraftKings co-founder, chairman and chief executive Jason Robins. “Customer engagement remains strong, and we continue to see no perceivable impact from broader macroeconomic pressures.
“Due to our ongoing investments in core online gaming technologies, we are in a strong position from a competitive perspective as we approach the beginning of the NFL season. We remain well capitalized, ready to enter new markets as they become live, and confident in our ability to compete and win with customers.”
Despite the successful Q2, the large losses reported in Q1 still weighed heavily in DraftKings’ half-year results. Revenue for the six months was $883.4m, up 44.8% year-on-year, but the business made an operating loss of $824.5m, and a net loss of $684.8m.
After the quarter ended, DraftKings also filed a patent application for a new game development corporation named Black Throne Studios.