DraftKings Feels Coronavirus Sports Crush in First Earnings Report, Stock Still Soars

Posted on: May 15, 2020, 08:18h. 

Last updated on: May 15, 2020, 10:19h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Before the open of US markets today, DraftKings delivered its first earnings report as a public company. It treated investors to a wider-than-expected loss and revenue that missed forecasts for the first three months of 2020, but the stock is extending a recent rally.

DraftKings First Earnings Report
DraftKings co-founder and CEO Jason Robins delivered the company’s first earnings report today. Results were ugly, but investors still bid the stock higher. (Image: Yahoo Finance)

In early trading, DraftKings is higher by almost 6.40 percent, despite telling investors it lost 18 cents a share on turnover of $88.54 million in the March quarter. Analysts expected a loss of 16 cents on revenue of $104.37 million. Reaction to those results by the investment community indicates a “pass” being given to the company, as no sports were available to be wagered on for half of March because of the coronavirus pandemic.

DraftKings recorded standalone Q1 year-over-year revenue growth of 30% despite the effects of COVID-19,” said co-founder and CEO Jason Robins in a statement. “Additionally, the engagement we continue to see from our customers validates the connection they have with our content, their passion for our products, and most importantly, their loyalty to our brand.”

The company said its 2021 and long-term results won’t be affected by COVID-19. The statement doesn’t contain forecasts for the current quarter. Those could be brutal because the menu of notable betting events in April was limited to the NFL Draft. Offerings are similarly scant this month until NASCAR returns this weekend.

Dealing With a Trying Environment

Gaming companies with significant sports betting exposure are grappling with a trying climate because of the coronavirus impact on traditional sports. But some, including DraftKings, are finding ways to fill the void and keep gamblers interested.

During the pandemic, DraftKings is offering wagering on eNASCAR and esports leagues Counter-Strike and Rocket League, as well as free-to-play games on reality TV shows, such as Top Chef and The Last Dance, ESPN’s Michael Jordan and the Chicago Bulls documentary.

“DraftKings continues to make progress on its key priorities despite the effects of the COVID-19 pandemic,” said the company. “These include entering new states, investing in product and technology to create more unique offerings and live betting for American-based sports, and acquiring and retaining our customers.”

Even amid a trying operating setting in the January through March period, DraftKings added some new avenues for growth, including online and retail sports wagering in Iowa. More recently, the company added iGaming in Pennsylvania and sports betting in Colorado. Analysts view iGaming as a new growth frontier for the industry, as more states search for revenue-generating avenues in a post-virus world.

Strong Cash Position

Although DraftKings isn’t yet profitable, its balance sheet is impressive for a newly public company. It had $97.1 million in cash on hand at the end of the first quarter. But when allotting for the combination with Diamond Eagle Acquisition Corp. and SBTech that set the stage for the initial public offering (IPO), that cash hoard jumps to $496 million, according to a filing with the Securities and Exchange Commission (SEC).

The company has $154.7 million in debt, including $44.5 million accessed on a $50 million credit revolver, but claims it has the capital to survive a year should revenue remain impaired.