DraftKings’ Revenues Increase In Q3 With A Push From Sports Betting In Windy City

DraftKings‘ revenue increased exponentially in the third quarter driven by a unique sports calendar with simultaneous offerings of all four major North American professional sports for the first time on record.

For the three-month period ended September 30, DraftKings reported pro forma revenue of $132.8 million, representing a 42% increase from the same period in 2019. DraftKings went public in April after completing a business combination with SBTech and Diamond Eagle Acquisition Corp. (DEAC), a special-purpose acquisition company.

With the launch of mobile sports betting in Tennessee earlier this month, DraftKings is now live with a mobile sports betting platform in 10 states. The 10 states, in combination, represent about 20% of the U.S. population, DraftKings said.

“The resumption of major sports such as the NBA, MLB and the NHL in the third quarter, as well as the start of the NFL season, generated tremendous customer engagement,” DraftKings CEO Jason Robins said in a statement.

“Our product offerings and scalable platform provide a distinctive and personalized experience for customers across the 10 states where we operate mobile sports betting today, and we look forward to entering additional jurisdictions at the earliest opportunity.”

A surge in the Windy City

During an hour-long earnings call on Friday morning, Robins was particularly bullish on the company’s prospects in Illinois. Without providing the exact figures, Illinois has become DraftKings’ second-largest state by handle, trailing only New Jersey, Robins noted. Illinois is also the company’s fastest-growing state in terms of handle, he added.

On Oct. 16, Illinois Governor J.B. Pritzker renewed an order allowing remote registration for Illinois mobile/online sports betting accounts to continue on a temporary basis. Pritzker allowed the order to expire in July, reinstated it in August, then subsequently renewed it in both September and October. The window remains open until Nov. 14. Pritzker’s suspension of the state’s in-person registration requirement enabled DraftKings to acquire customers directly onto its mobile product, Robins said.

In September, DraftKings announced a multi-year partnership with the Chicago Cubs, which includes plans for a sportsbook inside Wrigley Field. The opening of a retail sportsbook inside the venue still requires approval from the city of Chicago.

The bookmaker is currently live in Illinois at the property now known as DraftKings at Casino Queen, located in East St. Louis.

Forward guidance

After generating $321 million of pro forma revenue over the first nine months of 2020, DraftKings raised its full-year revenue guidance for 2020 on Friday. DraftKings now expects full-year revenue of between $540 million and $560 million, up from previous revenue guidance of $500 million to $540 million. The updated guidance is reflective of DraftKings’ strong performance in October and substantial user activation, a trend DraftKings attributes to an increase in marketing spending over the quarter. Over the three-month period, DraftKings spent more than $203 million on sales and marketing expenses, according to company financial statements, representing a nearly four-fold increase from the same quarter last year.

The full-year guidance is based on the assumption that all sports calendars will continue as announced, DraftKings Chief Financial Officer Jason Park said on the call. The range also assumes that Pritzker extends the suspension of the in-person requirement, Park explained. The governor is expected to renew the executive order for at least one more month, given the surging number of COVID-19 cases in Illinois and throughout the Midwest.

Before the COVID-19 pandemic spread to the U.S., DraftKings projected 2020 revenue of $540 million.

In addition, DraftKings introduced full-year 2021 revenue guidance Friday of $750 million to $850 million. The projection equates to 45% year-over-year growth based on the mid-points of DraftKings’ 2020 pro forma revenue guidance range and its 2021 revenue guidance range, according to a company statement. DraftKings did not factor potential 2021 revenue from Michigan and Virginia into the guidance, Robins said. DraftKings is positioned to compete in both states, but regulators in both are unlikely to allow sportsbooks to go live until the first quarter of 2021.

DraftKings did not address allegations regarding messenger betting during Friday’s call. On Nov. 5, Sports Handle published an exclusive story on a patron dispute featuring the bettor of a $3 million parlay, who claimed that the company suspended his account last month.

The Florida-based bettor placed the wagers on his DraftKings New Jersey mobile account through a proxy located in the Garden State, sources told Sports Handle.

“Sports betting is a regulated industry and we need to comply with the laws of every jurisdiction in which we operate,” a DraftKings spokesman told Sports Handle Thursday evening in an email. “We cannot comment on an ongoing investigation.”

The New Jersey Division of Gaming Enforcement (DGE) did not have an update on Friday, a spokesman told Sports Handle in an email. When asked last week whether New Jersey launched an inquiry regarding an alleged unlawful wagering situation at DraftKings, the New Jersey Office of the Attorney General (OAG) and the DGE declined comment.

DraftKings shares surged more than 10% on Friday to a session high of $45.50. As of 12:15 p.m. ET, DraftKings traded at $43.04 a share, up 4.34% on the session.

DraftKings hit an all-time high at $64.19 on Oct. 2, before tumbling below $40 a share in late October. With Friday’s gains, DraftKings traded at its highest level since Oct. 16.

Upon its public debut in April, DraftKings traded near $20 a share.

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