DraftKings’ Robins expects $30M in losses during Kentucky launch

Horse racing starting gate
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It was a big Q2 for DraftKings, as the company posted positive EBITDA results of $72.9 million and $875 million. It is night and day compared to Q2 2022, when the company posted $466 million in revenue and $118 million in losses.

Accordingly, updated guidance from the company for the year is now $3.4-$3.5 billion in revenue and between $190-$220 million in EBITDA losses. Like most other groups, DraftKings expects Q3 to be a loss but another profitable quarter in Q4.

On the earnings call, DraftKings CEO Jason Robins explained the role the upcoming launch of Kentucky sports betting would impact those numbers.

“We are very excited the Kentucky Horse Racing Commission recently set a target launch date of Sept. 28, 2023 for online sports betting, which is sooner than we previously anticipated. As a result, we expect 20 million of additional revenue in 2023 and a headwind of 30 million to 2023 adjusted EBITDA,” he said.

“We expect contribution profit which we defined as adjusted gross profit, less external marketing to grow to approximately $700 million in fiscal year 2023, which includes our investment into Kentucky.”

Kentucky is the only new state to launch this football season, however, Robins pointed out that this will be the first football season for Ohio and Massachusetts, which both launched earlier this year.

While these states are high priority, what has changed for DraftKings is how much the first wave of states are now effectively generating enough revenue to support new state launches.

“The bulk of the growth is going to come from the state that we launched from 2018 to 2021. We are starting to get some really good contributions from some of the 2022 states as well, but I think the degree to which we are still seeing growth in our older state is very significant and they’re obviously a bigger piece of the pie,” Robins explained.

He also pointed to the updated guidance as a sign that the company is reaching a point of being self-sustaining.

“Despite [Kentucky] not being in our prior guide and now being in our current guide, we still had a massive improvement in the guides. So that shows that not only can we fund new state launches through the results that we’re generating in old states and the cost efficiencies we’re finding but we can do that and continue to see upside on top of that, which is a great story I think from years past where we’ve always had to increase the loss outlook every time that we’ve had a new state launch.”

“We were particularly pleased with the results in our more mature online sports book and iGaming in our states that launch from 2018 through 2021 combined handle growth accelerated quarter over quarter and increased more than 35% compared to the same period in 2022,” added DraftKings CFO Jason Park.

Now that the pace of launches is slowing, Robins discussed how this is an opportunity for the company to focus on refining the product as opposed to hurriedly rushing out something compliant. When asked about whether AI would be part of the equation, Robins said the company was certainly looking into it.

“There will be some impact of the machine learning and AI work in this coming season. But I think some of the really big things that can fundamentally change the outlook of the business, those are still on the come.”