DraftKings ups adjusted long-term EBITDA again to $2.1bn

DraftKings has increased its long-term adjusted EBITDA guidance to $2.1bn (£1.5bn/€1.9bn), despite posting a net loss in its full year 2021 results.

This is an increase of 23.5%, from the previous adjusted EBITDA projection of $1.7bn.

This rise was explained on DraftKings’ investor day call, where the company gave background information on its 2021 full year results.

The results included a net loss of $1.52bn, despite revenue growth of 110.3% to $1.30bn.

Jason Robins, CEO of DraftKings, attributed the increase in adjusted EBITDA to belief in the company’s various operations.

“We are increasing our long-term adjusted EBITDA guidance to $2.1bn from $1.7bn,” said Robins. “The increase is due to the conviction we have as a result of our revised total addressable market (TAM) estimates and our continued strong position in both online services business (OSB) and igaming.”

DraftKings upped its TAM estimate in North America from $67bn to $80bn, a rise of 19.4%.
He added that the adjusted EBITDA estimate “does not include any long-term costs associated with predicted Golden Nugget Online Gaming (GNOG) synergies, or any upsides from new initiatives such as marketplace and media.”
DraftKings announced its acquisition of GNOG in August 2021, in a deal worth $1.56bn.
Robins also confirmed that any estimated GNOG adjusted EBITDA synergies, which are projected to be $300m, would be subject to the acquisition closing.

He went on to explain that the increase in EBITDA is based on legalisation rates in the US and Canada. The business assumed it would reach this target when 65% of the US has access to legal sports betting and 30% has access to legal igaming, while 64% of Canada has access to both.
“Our multi-year plan supports a path to 30%+ EBITDA margins, and based on out TAM and share outlook, we believe there is a path to $2.1bn of EBITDA once we reach 65% and 30% for legalisation rates for OSB and igaming respectively, and 64% legalisation of the Canadian population,” said Robins.

In the investor presentation DraftKings included a net revenue figure of $6.7bn, which it expects to attain once legalisation rates are reached. Online sportsbook revenue is expected to account for $3.3bn of this, while igaming is estimated to make up $2.5bn. Digital financial services and Canada revenue are expected to reach $400m each, while the remaining $100m is attributed to other revenue forms.

Elsewhere, Robins commented on DraftKings’ state-by-state operations, saying that the company expects a rise in contribution-positive states in FY 2022.

“Five of our states, including New Jersey, turned contribution-positive in FY 2021 and we anticipate five more states to become contribution profit positive in FY 2022,” said Robins.

Jason Park, DraftKings’ chief financial officer, added that this would make a “total of ten states, representing 18.7% of the population while the remaining 17.4% of the population would still be in the investment phase in 2022.”

Earlier today DraftKings agreed to pay $150,000 as part of a civil penalty after it was found to have violated proxy betting rules in New Jersey.

Author: Raymond Fleming