Aug 5: Earnings extra - DraftKings looks to market share gains

Draftkings and Century Casinos release Q2 earnings

Earnings+More

Aug 5

Good afternoon. Welcome to our second earnings extra of the week featuring:

DraftKings raises guidance after paring back quarterly losses.
Century Casinos feeling the spark in Nevada.

Going to a party.

DraftKings Q2

Revenue rose 56.6% to $466.2m; B2C up 68% to $455m.
Adj. EBITDA losses rose 23.9% to $118.1m. H1 losses rose 74% to $407.6m.
Stock-based compensation of $135m down 215; H1 stock-based comp static at $322.5m.

More cake: Having upgraded guidance on both revenues and projected adj. EBITDA losses for the year, CEO Jason Robins was keen to suggest DraftKings was well-positioned going into the crucial football season, suggesting he hoped to gain market share.

Jason Robins: “If we execute that plan, then we are hopeful we will actually gain some share in the back end of the year.”

If I knew you were coming: Robins didn’t comment on what one analyst termed the “half-baked launches” from some of DraftKings’ competitors ahead of the last football season and whether that meant the competition would be tougher this time around for the top three.

Recession, what recession? Robins said there was ”no perceivable degradation” in consumer activity over the quarter.

Parlay-vouz? He noted that enhancing the parlay offer was a top priority for the company, suggesting the company had yet to see any limit to the take-up.

“It’s a pretty big game and we are obviously not done.”
“Right now a minimum ceiling would be where FanDuel is,” he added. “That feels like a pretty high ceiling.”

Nuggets: The Q2 results include nearly two months of contribution from Golden Nugget. On the call, Robins noted that DraftKings’ own-brand igaming revenue rose 33% YoY. But he added that Golden Nugget had yet to migrate the platform.

State of play: Robins said the company remained cautiously optimistic about California. “Things could swing either way,” he said. He wouldn't be drawn on what the economics of the opening in California would look like for DraftKings,

CFO Jason Park noted that even if California opens he expects 2022 to be the “peak year” for EBITDA losses.
He added that the company would be generating enough cash flow should the market open to fund the opportunity without resorting to any cash call.

New fantasy: A next-gen NFT-powered fantasy game called Reignmakers Football. “We believe no one else in our industry is driving innovation in this way,” said Robins.

Instant verdict: The higher revenue/lower losses message from Q2 was appreciated by the analysts, albeit with caveats. “The Q2 beat is great to see, but we are cautious when extrapolating out… as it may simply imply a shift in costs” into Q3 and Q4.,” suggested Wells Fargo.

Roth cautioned the improved EBITDA losses came at the expense of market share losses to FanDuel.
“Perhaps DraftKings is beginning to prioritize profitability over market share,” they added.
Jefferies said the balance between “generating incremental revenue while managing costs” remains a key issue.

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Century Casinos Q2

Revenue rose 21% to $111.1m while adj. EBITDA was up 18% to $29.8m

Unmasked: EBITDA was at an all-time high helped over the period by the removal of the final Covid restriction in Alberta, Canada where Century has six properties split between Edmonton and Calgary. Canadian revenue grew 186% over the period to $19m.

Beat the clock: The company has completed the first part of its transaction to gain control of the Nugget Casino Resort in Sparks, Nevada. Having bought the propco for $95m, it will complete the opco acquisition within a year.
The company repeated that it was excited to be entering the Reno/Sparks, Nevada market.