Net loss reaches $1.52bn at DraftKings despite revenue growth in 2021

| By Robert Fletcher
DraftKings reported a net loss of $1.52bn (£1.12bn/€1.34bn) for its 2021 financial year despite revenue more than doubling year-on-year.
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Revenue for the 12 months to 31 December 2021 amounted to $1.30bn, up 110.9% from $614.5m in the previous financial year as DraftKings continued its expansion into new markets across the US.

Following launches in New York and Louisiana last month, DraftKings is now live with mobile sports betting in 17 states, as well as with igaming in five states, with new launches planned for the current year.

This growth meant average monthly unique players (MUPs) jumped from 883,000 in 2020 to 1.5 million, while average revenue per MUP climbed 31.4% to $67.

However, this expansion also led to an increase in spending, with cost of revenue up 110.6% to $794.2m, while sales and marketing costs also increased 96.6% to $981.5m. Expenses for product and technology climbed 36.3% to $253.7m, while general and administrative costs hiked 92.3% to $828.3m.

This left an operating loss of $1.56bn, significantly wider than the $850.0m loss posted at the end of 2020.

DraftKings did recover some of this loss via $30.1m in gain on remeasurement of warrant liabilities, $2.0m in interest income and $12.0m in other income, but pre-tax loss still hit $1.52bn, compared to $1.24bn in the previous year.

DraftKings paid $8.3m in tax, leaving an overall net loss of $1.52bn, wider than the $1.24bn loss posted at the end of 2020. 

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was also hit, reaching a loss of $676.1m for the year, compared to a loss of $393.9m in 2020.

Turning to the fourth quarter and revenue for the three months to 31 December was 46.9% higher at $473.3m, a figure that DraftKings chief executive and chairman Jason Robins said exceeded expectations. 

This increase came despite lower-than-expected hold in October, primarily due to NFL game outcomes during the month. Average MUPs for the quarter jumped 31.6% to 2.0 million, while average revenue per MUP was also up 18.5% to $77.

Looking at spending and cost of revenue increased 59.0% to $253.2m, sales and marketing costs 45.0% to $278.4m, product and technology expenses 5.3% to $69.6m, and general and administrative costs 39.0% to $240.8m. 

Higher spending offset revenue growth and meant operating loss widened from $268.3m in 2020 to $368.8m.

Gain on remeasurement of warrant liabilities amounted to $33.0m, while DraftKings also noted $886,000 in interest income and $12.0m of other income. This left a pre-tax loss of $322.9m, wider than the $242.7m loss posted in the previous year.

DraftKings paid $6.6m in tax, resulting in an overall net loss of $326.3m, compared to $242.7m in 2020. 

In terms of adjusted EBITDA, this reached negative $128.0m for the quarter, compared to an EBITDA loss of $87.9m in the previous year.

“Our excellent quarter capped off a year in which five of our states were contribution profit positive, further demonstrating the effectiveness of our state playbook and supporting our positive view of the industry’s TAM,” Robins said.

“We enter 2022 positioned to grow our market share, further optimise our user experience and continue to strengthen our multi-product suite of offerings.”

Despite posting a wider net loss for both the full year and fourth quarter, DraftKings said it was increasing its fiscal year 2022 revenue guidance from a range of $1.7bn to $1.9bn, to a range of $1.85bn to $2.0bn, which would represent year-on-year growth of 43% to 54%.

Adjusted EBITDA loss for 2022 is forecast to be between $825.0m and $925.0m.

DraftKings said this guidance reflects its launch of mobile sports betting in New York and Louisiana, noting that it expects to be profitable across all states where it is currently live in 2022.

In addition, assuming it do will have not launched any additional states after 31 December, DraftKings expects to generate positive adjusted EBITDA in the fourth quarter of 2022.

Potential further launches could occur in Maryland, Puerto Rico and Ohio, which have all now legalised mobile sports betting. DraftKings said it has the opportunity to launch via a market access agreement or direct licence in each of these states.

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