May 6: DraftKings bangs earnings beat drum

DraftKings Q1 earnings extra, Century Casinos Q1

Earnings+More

May 06, 2022

Welcome to our earnings extra looking at the Q1 results from DraftKings which show the company beating EBITDA expectations.

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DraftKings Q1

Revenue up 34% to $417.2m, B2C was up 44% to $403.7m, B2B fell 57.1% to $13.5m.
Adj. EBITDA loss of $290m, against loss guidance of $320m-$340m.
FY22 revenue guidance moved up by $50m to $1.925bn-$2.025bn.
FY22 Adj. EBITDA up ~$75m to a loss of between $760m-$840m.

Golden delicious: Having completed the Golden Nugget Online Gaming deal this week, DraftKings said it would add between $130m-$150m, taking revenue guidance revenue up to a possible $2.165bn. Actual adj. EBITDA loss guidance is between $820m-$900m.

CFO Jason Park said the improvement was due in part to the timing of expenses but also due “true” expenditure savings. He suggested that national advertising was now taking up more of the market mix, contributing to the lower Q1 marketing spend.
“I think some of the very aggressive new user offers have tapered off significantly,” he added.
“That’s been a big source of efficiency and we expect that to increase as more states launch,” he added.

Analyst quick take: Jefferies said the narrower EBITDA losses should be welcomed by the market which has “been intensely focused on the path to profitability”.

“More importantly, the industry in general has signalled more discipline with promotional and marketing spend compared to the last few quarters.”

Fun, fun, fun: Talking about product initiatives, Robins said the company would continue its push on parlays and same-game parlays.

Jason Robins: “We’ll continue to find ways to introduce that product and ensure they understand how fun it can be.”

Golden state: CEO Jason Robins said it was “significant” that the ballot measure proposed in California by DraftKings, FanDuel et al managed to reach the number of signatures necessary to get the proposal included in the November ballot.

Ramp up: There were no hard rules on how long it took states to become profitable, but with New Jersey now EBITDA-positive, Robins said:

“We are seeing faster ramps and paths to profitability. There are no hard rules, but it’s certainly moving in a positive direction.”

Balancing act: On having to balance EBITDA losses while competing for market share and identifying M&A opportunities, he added:

“The GNOG acquisition fits a template and is strategically complementary. It doesn’t burn a tremendous amount of cash and is not a drag on EBITDA.”

Nevada calling: Asked about Nevada, Robins said that DraftKings was “very interested” in “exploring opportunities” there. But he noted that in-person registration requirements worked against the company.

“I think if the opportunity presents itself, we’d love to be able to offer customers in Nevada our product.”

Missing in action: Robins insisted DraftKings would launch in Ontario “soon” though he noted that due to the previous gray market, the company does not believe the timing of its launch will have “any impact” on the market share they can achieve.

Park suggested the launch would come in May.

SB who? B2B revenues have tumbled down to $13.5m. CFO Jason Park said this was due to the termination of the company's previous Asian reseller agreement.

In lockstep: Recall, earlier this week Flutter Entertainment said its US operations - largely FanDuel - saw revenue growth of 45% in Q1 to $575m.

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Century Casinos Q1

Revenue up 42% to $103.1m and adj. EBITDA up 62% to $23.8m.

More nuggets: Century noted that on April 1 it bought a 50% stake in Smooth Bourbon (the PropCo) for ~$95m. Under the terms of that deal, and pending regulatory sign-off, the company will purchase 100% of the “membership interests” in Nugget Sparks (the OpCo) for $100m.

Also in April the firm entered into a $350m credit agreement plus a $30m revolver with Goldman Sachs. The company drew on the full amount for the OpCo/PropCo purchase.
Adding Nugget Sparks will mean 80% of Century’s revenues going forward will be from the US.