Like many other sportsbook operators, DraftKings lost money in Q2 but the company believes they are trending in the right direction. So much so, adjusted guidance for DraftKings earnings for the full year went up.
Revenue was up YoY with $466 million for Q2 compared to $298 million for the same period in 2021. The continued strong performance in New York, additional revenue from Golden Nugget Online Gaming (GNOG), and the launch in Ontario helped contribute to that number.
Adjusted EBITDA for Q2 was $118 million
Revenues were up substantially YoY but the company is still losing money. Net income losses did shrink to $217 million the past quarter compared with $305 million the past year.
Adjusted EBITDA losses amounted to $118 million, up 24% from $95.3 million last year. In the release, DraftKings noted these losses exceeded expectations by 40%.
“DraftKings had an excellent second quarter, exceeding expectations for revenue and Adjusted EBITDA,” said DraftKings’ co-founder, Chief Executive Officer, and Chairman of the Board 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.”
New projections are the company will generate $2.13 billion in revenue, up from $2.115 billion. On the adjusted EBITDA front, new projections are $800 million in losses compared to a prior estimation of $860 million.
Q3 numbers will live and die by promotions
With both revenues and EBITDA exceeding forecasts, Robins and others were optimistic, especially given the rest of the year will see big numbers thanks to football season. Robins projected $1 billion in NFL handle for the company this fall.
The potential for revenue is huge, but there is also the potential for substantial spend on promos at the start of football season. Robins addressed the situation for the current quarter on the earnings call:
“As many of you know, our Q3 revenue and adjusted EBITDA have the potential for high upside or downside volatility for two primary reasons. First, a significant amount of the quarter’s expected revenue comes from the final three weeks of September due to the beginning of the NFL. Whole rate tends to normalize over the course of a full NFL season, but it can vary significantly over the course of a few weeks. It’s gonna have a pronounced impact on Q3. Considering July and August are month-by-month the lightest month of the year and the sports calendar. Second, the last few weeks in September heavy in terms of promotional activity, which is driven by customer acquisition and reactivation. While some of the promotions we run have predictable numbers behind them. There are others that depend on game outcomes which amplifies potential volatility in Q3.
Looking forward into the longer term, DraftKings plans to launch in Maryland, Ohio, Kansas, and Puerto Rico soon, bringing its online sports betting product to 44% of the US population. With the addition of its home state Massachusetts to that list, the company is confident it can continue to gain significant market share in these new territories.
“We have more conviction than ever in our ability to reach positive free cash flow with our current capitalization,” Robins said. “Despite that conviction, we are still making a concerted effort this year to drive efficiency opportunities in early genomics energies and have already identified approximately $100 million of cost reductions.”
DraftKings to introduce combination same game parlays
Given the massive popularity of same game parlays, DraftKings announced it will continue to advance and innovate that product. New functionality will soon include the ability to void individual legs of a parlay as well as combine multiple different SGP bets.
As for GNOG, DraftKings is looking for synergies between the two brands and continues to understand how the Golden Nugget customer differs from DK users. Plans are to migrate the Golden Nugget app to the DraftKings platform.
The company also continues to invest heavily in NFT technology. DraftKings is rolling out Reignmakers, which it described as, “an innovative sports gaming experience that allows customers to buy NFTs of athletes and build teams for contests.” The Reignmakers is already up and running.