DraftKings Reducing Staff by 3.5 Percent in Cost-Cutting Move

Posted on: February 1, 2023, 01:37h. 

Last updated on: February 1, 2023, 03:46h.

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

DraftKings (NASDAQ: DKNG) announced Wednesday it’s laying off 140 employees, or about 3.5% of its workforce, in an effort to reduce costs.

DraftKings layoffs
DraftKings CEO and cofounder Jason Robins, seen above. The company is laying off 3.5% of its workforce to cut costs. (Image: CNBC)

The Boston-based sportsbook operator didn’t specify in which areas those headcount reductions will occur. Nor did it mention the possibility of charges against earnings related to layoffs.

With an increased focus on operational efficiencies, we are constantly evaluating our teams to ensure that they are best positioned to meet our company goals in 2023 and beyond,” a DraftKings spokesman told Seeking Alpha. “We have decided to reorganize some teams, which is resulting in the elimination of approximately 140 roles.”

The gaming company didn’t reveal in what locations it shed the jobs. In addition to its Boston headquarters, DraftKings has an office in Las Vegas, though it doesn’t take bets in Nevada.

DraftKings Layoffs Arrive at Interesting Time

News of DraftKings paring staff arrives as the domestic sports calendar is entering one of its busiest stretches, indicating the operator sees value in reducing its workforce sooner than later.

The Super Bowl — the most-wagered-on event in the US — is less than two weeks away, and the NCAA Tournament, also known as March Madness, is right around the corner. And there’s still plenty of regular-season college basketball, NBA, and NHL action for bettors to embrace.

DraftKings’ announcement of reduced staffing levels comes ahead of the company’s fourth-quarter earnings report on February 16, during which the operator could provide updated 2023 guidance. It’s widely believed the sportsbook firm will turn profitable at some point this year, and some analysts say the layoffs signal management’s increased focus on cost reductions and profitability.

In a note to clients today, Piper Sandler analyst Matt Farrell said that against the backdrop of investors demanding profitability from DraftKings, the layoffs could prove positive. He adds the staff reductions also signal management is prioritizing profitability. Farrell rates DraftKings “overweight” with a $15 price target.

Interesting Timing Part II

Not only does DraftKings’ layoffs announcement arrive in advance of a busy stretch of sports wagering opportunities, but it also comes as a slew of US companies announce similar moves. In a sign the US economy may be on fragile ground, FedEx (NYSE: FDX) said earlier today it’s slashing its officer and director team by more than 10%.

Electric vehicle manufacturer Rivian Automotive (NASDAQ: RIVN) said it’s paring its staff by 6%, or 840 roles. On Tuesday, PayPal (NASDAQ: PYPL) announced the elimination of 2,200 jobs. Recently, tech giants, including Google parent Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Facebook parent Meta Platforms (NASDAQ: META), and Microsoft (NASDAQ: MSFT), among others, each announced large-scale layoffs.

The gaming industry hasn’t been immune from the trend, and DraftKings isn’t the first offender. Last month, Bally’s Corp. (NYSE: BALY) said it will cut up to 15% of staff at its digital gaming unit as it moves to make that business profitable.