Major American sports leagues’ return from their coronavirus-related hiatuses had fans celebrating and third-quarter business for sports betting operator DraftKings surging. The company’s monthly unique payers topped 1 million in the quarter, a 64% year-to-year jump, and revenue topped Wall Street forecasts. Earnings per share missed.
Shares of Boston-based DraftKings, which went public in April, jumped more than 9% during Friday trading on the Nasdaq and finished 3.85% higher, up $1.59 to $42.84.
In a 10-Q Friday filing with the Securities and Exchange Commission, DraftKings said it lost $347.7 million, or 98 cents per share, for the three months ended Sept. 30, compared with a net loss of $55.9 million, or 30 cents per share, a year earlier. Analysts surveyed by Seeking Alpha had, on average, forecast a 63-cents per-share loss.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, was a negative $197.1 million compared with a negative $48.4 million, a year earlier.
Quarterly revenue nearly doubled to $132.8 million from $67 million, topping the $131.7 million estimate of Seeking Alpha-polled analysts.
Macquarie Securities gaming analyst Chad Beynon said he remains positive on his forecasts for online gaming and sports betting despite DraftKing’s third-quarter results, which he blamed on high promotions and low hold.
“DraftKings remains our top pick in online gaming, and we believe they remain on track to generate 20% (of the) U.S. online sports betting and iGaming market share given their strong brand, data science, and retention tools, and in-house technology offerings,” Beynon told investors Friday.
DraftKings described its steps toward growth: becoming the PGA Tour’s official betting operator by expanding a multiyear content and marketing relationship; remaining Major League Baseball’s official daily fantasy sports partner with a multiyear deal extension; a multiyear agreement with ESPN to become a co-exclusive sportsbook link-out provider and exclusive daily fantasy sports link-out provider.
DraftKings has partners in eight states and has deals to display fantasy sports and betting content on Bleacher Report and Turner Sports television programs.
Legal sports betting’s market has been widening incrementally since the U.S. Supreme Court’s in 2018 struck down a federal law from 1992 that banned the practice. With Tennessee’s sports betting launch on Nov. 1, there are now 19 states and Washington, D.C., with legal and regulated sports betting. Three more states – North Carolina, Washington, and Virginia – have legalized the activity and are expected to launch next year.
Three statewide sports betting initiatives in South Dakota, Maryland, and Louisiana were passed by voters on Nov. 3. Half of the U.S. states have approved the legalization of sports betting in less than three years since the Supreme Court’s landmark ruling.
“The resumption of major sports such as the NBA, (Major League Baseball) and the NHL in the third quarter, as well as the start of the NFL season, generated tremendous customer engagement,” DraftKings co-founder, CEO and Chairman Jason Robins said in a statement.
Jason Ader, CEO of investment company SpringOwl Asset Management, told CNN Business on Friday that online gambling had entered a “golden age.”
“Customer signups and revenue growth are quite strong,” said Ader, whose company, CNN Business pointed out, has a stake in Flutter, a DraftKings fantasy sports betting rival.
As Yahoo Finance reported, DraftKings’ third-quarter business grew in the quarter despite dips in television ratings. The New York Times that the playoffs in the National Basketball Association and National Hockey League, Major League Baseball playoffs and the regular season, the U.S. Opens for tennis and golf and college football have all had ratings declines of at least 25 percent from 2019. Forbes reported that National Football League game ratings for the first six weeks of the season were down 13% from a year earlier.
The Times suggested that sports faced stiffer competition for viewers, especially on cable, where news network viewership in October rose 79% from a year earlier, perhaps because of the contentious presidential election or pandemic coverage.
“It’s nice to speculate, but no one really knows,” Robins told Yahoo News when asked about the ratings dip, “Intuitively, it makes sense that when a large percentage of the country’s attention is taken away from sports and they’re glued to channels like CNN and Fox News instead, they’re probably not going to have the same type of viewership levels in the NFL that they would have in a nonelection year.”
Follow Matthew Crowley on Twitter @coptyjockey
