DraftKings 57% Revenue Surge Promises Bright Future
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00:00 (upbeat music)
00:02 - They wanna hear about money.
00:04 Let's talk about draft games.
00:05 And they had their earnings call yesterday.
00:08 And I know that you were on it.
00:09 I know you also sent some notes out on social media,
00:12 but share with the Newswire audience today.
00:15 - Yeah, you know what, Craig?
00:17 So they released their earnings last night.
00:19 The actual call was this morning.
00:20 So there was a lot of pent up energy
00:24 just waiting to hear what they had to say
00:25 because the earnings release was terrific.
00:28 And I'll say this, if you were looking
00:30 to invest in draft kings, you missed the boat this time
00:33 because today they're up 11% right now as I look at it.
00:37 And it's because you look at that top line number
00:40 that you said at the beginning of the show, Craig,
00:42 that 57% revenue growth.
00:45 But really what we're looking at here
00:47 is something called adjusted EBITDA.
00:49 EBITDA is earnings before interest, taxation,
00:52 depreciation and amortization.
00:54 Basically, that's a way to look at a company
00:58 without all of those kind of non-cash line items
01:01 that get thrown in there.
01:02 And it's just a true look at how the company is performing.
01:07 And so you look at that and in 2022,
01:11 draft kings expected to have EBITDA loss at the midpoint.
01:16 It was 525 million they expected to lose last year.
01:23 They upgraded that yesterday to now
01:26 for the entirety of 2023,
01:28 they only expect to lose 105 million at the midpoint.
01:32 So over the year in three quarters, Craig,
01:36 there has been enough improvement in draft kings operations
01:39 that they've knocked $420 million in losses off of the books.
01:44 And you have to say why,
01:48 and this is when it really comes down
01:50 to what the better is wanting here, right?
01:52 It's because they have those same game parlays
01:55 and they're getting better at them.
01:57 And when I say they're getting better at them,
02:00 that means they're pricing them better, right?
02:02 And remember, anything that a business wants to sell you
02:07 usually means that they're making money on it.
02:09 So when you open up that draft kings app
02:11 and you see same game parlays here, left, right and center,
02:14 and let us build them for you and let us do this and that,
02:17 that's because they're making money off of them.
02:19 They're doing a really good job at it.
02:21 And they're spending less on external marketing too, Craig.
02:24 We actually saw their marketing and sales line item
02:27 decreased this quarter, which off the top of my head,
02:31 I'm pretty sure that's the first time
02:32 that has happened for draft kings.
02:35 And look, they still spent a ton in that, right?
02:38 They still spent over $300 million in that for one quarter.
02:43 So it's not like draft kings isn't spending anymore,
02:46 but they're finally starting to reach that scale
02:50 where the revenue is really starting to drop down
02:53 to the bottom line.
02:55 Now, it's interesting,
02:56 we actually didn't get a whole lot of information
03:00 on this call because draft kings has an investor day
03:03 coming up in, I think it's 11 days.
03:04 I think it's November 14th, same day that ESPN bet drops.
03:08 So that's, it's gonna be a busy day,
03:10 but what we're looking for from that investor day,
03:14 we wanna hear how draft kings
03:16 is treating the older states, right?
03:18 Because those older states are still very important
03:21 to their overall business
03:23 because you're spending less in those states now.
03:26 Obviously you don't need to advertise nearly as much
03:28 in year three as you did in year one.
03:30 And so we wanna know what those look like
03:33 because look, that's gonna be driving the business
03:35 from here on out.
03:36 And also iGaming, Jason Robbins, the CEO of draft kings
03:40 talked about iGaming a lot and said,
03:43 look, that is still a huge opportunity for us.
03:47 It's only in a couple of states right now.
03:50 And the concern about iGaming over the past decade or so
03:54 has been that it was going to cannibalize
03:57 what those retail, those in-person casinos were making.
04:00 And we've learned that's simply not true.
04:02 That is not what iGaming does.
04:04 It's a creative.
04:05 And so we're gonna start to see more and more states
04:08 look at that.
04:09 And man, draft kings in the iGaming world,
04:13 if they have sports betting locked down
04:15 and they're turning a profit on that,
04:17 draft kings is just gonna be a monster moneymaker
04:20 going forward.
04:21 They're looking at 400 million in adjusted EBIT off
04:26 for next year at the midpoint.
04:30 And you just have to wonder how conservative that is
04:33 when you have them chopping off 420 million
04:37 in losses like that in one year.
04:39 You have to wonder if that 350 to 450 range
04:42 on the positive side next year
04:43 is a little conservative as well.
04:45 So look, draft kings investors have been waiting
04:49 for this day.
04:50 They have been waiting for everything Jason Robbins
04:53 and Jason Park and the management team.
04:56 They've been waiting for all of it to actually happen
04:58 and come true.
04:59 And now it's really starting to.
05:00 And draft kings is, it's a good stock to be on right now.
05:04 (upbeat music)
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