DraftKings’ revenue increased year-on-year for 2019 and but losses widened, as its merger with SBTech approaches, but the operator remains confident of seeing earnings exceed $1bn in the long-term.
The daily fantasy sports and sportsbook operator’s net revenue came to $323m, up 42.7% year-on-year.
This was offset by several large operating costs, though, which combined to total $470m, up 55.1%. Costs of revenue, including taxes, platform costs, payment processing costs and revenue share payments to affiliates came to $104m, up 113.6%.
Sales and marketing costs totalled $185m, up 27.1%, while product and technology costs came to $56m, up 70.3% and general and administrative costs were $125m, up 64.7%.
This led to a loss of $147m from DraftKings’ operations, almost double it’s losses for 2018.
However, the operator’s EBITDA loss came to $99m, 68.2% greater than Draftkings’ 2018 EBIDTA loss, when other adjustments were factored back in.
A total of $14m was made in adjustments related to data and analytics costs, plus a further $18m from stock-based compensation and $17m in other adjustments such as non-recurring and special project costs.
In its largest market of New Jersey, the only market DraftKings have been active in for the whole of 2019, the operator made $119m in gross gaming revenue, up 357.7%, $85m in net gaming revenue, up 304.8% and $40m in gross profit, which is net gaming revenue less costs of revenue.
The operator’s $6m loss is a decline from a loss of $10m in 2018.
Despite the increased EBITDA loss to $99m, DraftKings said it still had a path to EBITDA of $1.2bn for the combined company in the future.
The operator said this projection is based on 65% the US population living in jurisdictions with legal online sports betting, of which DraftKings has a 25% market share for $2.4bn in revenue, and 30% living in areas with legal igaming, of which DraftKings expects a 15% market share and $700m in revenue. DraftKings expects these figures to be realised after five years of maturity at these levels of legality.
In addition, the operator expects $300m in daily fantasy sports revenue and $400m in revenue from SBTech at this point.
DraftKings chief executive Jason Robins also said that the business expects its merger with SBTech to close early in the second quarter of 2020.
In addition, Robins added that he doesn’t expect any further acquisitions in 2020.
“I think right now we’re in a pretty good spot in terms of M&A,” Robins said. “We feel like we have everything we need to succeed in the US market and that also, there’s an element of focus too.”
Robins also said that the outbreak of the novel coronavirus (Covid-19) may not be a negative for DraftKings’ business, due to the importance of online for the operator’s revenue.
“From a business standpoint, in some ways I think there could be some tailwinds here for us,” Robins said. “Our business is almost 99% online. And I think with more people staying home and more people maybe having more entertainment spend available to them because they’re not taking vacations or going out as much. That could potentially have some tailwinds.
“Obviously, we’re paying close attention to scheduling of sports and I think one potential risk is that if any major sporting events get cancelled. But right now we haven’t seen any major sporting events get cancelled.
“Something even like the Olympics isn’t a huge betting thing for us, so it really comes down to what the professional sports leagues are going to do. So far I’ve seen no indication that there’s anything planned to stop there.”