After two participants in a so-called “super bid” expressed optimism earlier this week that their companies will be awarded mobile DraftKings echoed the sentiments of its bidding partners on Friday morning.
Addressing analysts on DraftKings’ third-quarter earnings conference call, CEO Jason Robins remained hopeful that the company will receive a license in New York, as the hotly competitive bidding process draws near a close. New York is targeting an early 2022 launch for the rollout of mobile sports betting, ahead of Super Bowl LVI in February.
Robins’ comments came roughly 18 hours after the New York Gaming Commission disclosed that the commission will consider FanDuel and B2B sports betting technology provider Kambi emerged as the likely winners of the coveted New York bids.
First Wynn Resorts, and Genting, which owns Resorts World.
“Hopefully, those rumors are true, we’ll be respectful of that process,” Robins said on the call. “With that said, if we were to be awarded a license, we feel just like we do in other states, that we can achieve the same long-term profit margins in New York.”
NEW YORK:
Two consortiums led by #FanDuel and #Kambi appear close to winning coveted spots for mobile sports betting licenses in New York, sources say.
(@MattRybaltowski breaks it down)https://t.co/Vfbjj3gwrq
— Sports Handle (@sports_handle) November 3, 2021
Under the commission’s final tax rate matrix released last month, sportsbooks will be assessed a 51% tax rate on online gross gaming revenues if nine operators are granted entry into the market. The figure declines to 50% if anywhere between 10-12 operators gain market access. Alternatively, if only eight operators enter the market, the state will assess a tax rate of 58%.
Industry on bidding process 33653u
While neighboring New Jersey has had mobile sports betting in place for more than three years, New York has moved at a slower pace. In January, then-Gov. Andrew Cuomo reversed a longstanding position against online sports wagering, identifying it as a driver for generating a projected $500 million in annual tax revenue for the state at market maturity.
By July, the commission released a contained the blueprint for the intricate competitive bidding process. At least one company attached a 60%-plus tax rate in its preferred scenario, a figure that would have resulted in the nation’s highest tax rate for mobile sports betting. As a result, the commission had the option of considering multiple scenarios where the rate ballooned above 60%, including tax brackets at 62% and 64%.
“Look, I can assure you we weren’t [in] the 62% crowd,” bet365, as well as industry newcomer Fanatics, may spend the weekend on the bubble ahead of Monday’s meeting.
$MGM officials all but confirm that BetMGM will be one of "about 9 to 10" online sports betting companies licensed in New York. MGM was part of consortium w/FanDuel, DraftKings & Bally Bet; New York Post reports Caesars, WynnBet, Resorts World, RSI & PointsBet group also approved
— Ryan Butler (@ButlerBets) November 3, 2021
Penn National Gaming President and CEO Jay Snowden offered a gloomy forecast Thursday on the company’s third-quarter earnings conference call, describing a 50% rate as a “margin killer” that will make it arduous for any operator to turn a profit. Another gaming executive, Bally’s CEO Lee Fenton, acknowledged that he thinks none of the bidders are happy with a 51% tax rate, while emphasizing that the same can be said of “all of the partners” the media conglomerate is working with.
Earnings results 4x3e5b
For the three-month period ended Sept. 30, DraftKings had revenue of $213 million, up 60.4% from revenue of $132.8 million over the same period a year ago. DraftKings also reported adjusted EBITDA of negative $313.6 million (earnings before interest, taxes, depreciation, and amortization), compared with adjusted EBITDA of negative $197.1 million from the year-ago quarter. During the three-month quarter, DraftKings unveiled an in-house technology platform powered by SBTech. A lower than expected hold over the quarter, primarily due to NFL game outcomes, resulted in $40 million less than DraftKings projected in its guidance, Robins said.
Still, DraftKings set a full-year 2022 revenue guidance on Friday of $1.7-$1.9 billion, which equates to 43% year-over-year growth based on the midpoints of the company’s 2021 and 2022 revenue guidance range. DraftKings also increased its 2021 revenue guidance to $1.26 billion and narrowed the guidance range of $1.21-$1.29 billion to a range of $1.24-$1.28 billion.
Over the period, DraftKings also increased monthly unique payers (MUPs) by 31% to 1.3 million, as 34% of its marketplace s were new to DraftKings, the company announced. Those s completed more than 120,000 primary and secondary transactions, totaling approximately $20 million of gross merchandise volume, DraftKings added. DraftKings also saw upward trends with another metric it calls “ARPMUPs,” or average revenue per MUP. For the quarter, DraftKings’ ARPMUPs rose 38% from $34 to $47.
Metrics on customer acquisition and retention will be closely monitored in New York in an intensely competitive marketplace. Home to several professional sports league headquarters and rabid fanbases for numerous teams, the Empire State has potential to become the nation’s largest market for mobile sports betting, Cuomo suggested earlier this year. But one provision in the RFA prevents sportsbook operators from deducting promotions (i.e. free wagers and boosted bets) from revenue for ing purposes. The strict regulations appear to limit a robust customer acquisition tool for top books from the outset.
[(f)[ (g) Promotions. Promotional [gaming credits] spend shall not be [used in a sports wagering lounge] deducted from revenue or added to loss when calculating gross gaming revenue. No promotion related to sports wagering may be offered without the prior approval of the commission.
–§ 5329.29. Gross gaming revenue reports and reconciliation. New York Gaming Commission RFA For Mobile Sports Wagering Platform Providers
For instance, DraftKings spent $304 million on sales and marketing expenses during the third quarter, marking the fifth consecutive quarter that expenses in the category eclipsed $170 million.
DraftKings’ ability to quickly acquire customers in other states gives the company confidence that it can do the same in the Empire State. Over the first 30 days of sports betting operations in Arizona, the company acquired eight times the number of customers it did in New Jersey on a population-adjusted basis, DraftKings Chief Financial Officer Jason Park said on the call. Though DraftKings generally projects taking two to three years from a state launch to achieve profitability, the company achieved its target in New Jersey ahead of schedule, Park added.
The company also has numerous levers it can pull in New York, such as cutting back on external marketing, Robins noted. It is a strategy he expects every winning bidder to pursue given the high tax rate in New York.
“Certainly, early on, we’ll approach it just like we do with other states and look for that two- to three-year path of profitability,” Robins said.
Briefly addressing DraftKings’ decision to abandon a $22 billion proposed acquisition of UK-based Entain, Robins explained that while impressed with Entain’s leadership team, the company ultimately decided that it wasn’t the right fit. Following a leak of DraftKings’ initial proposal, the company was required to publicly disclose the acquisition attempt, pursuant to UK takeover code, he indicated.
On a per share basis, DraftKings reported earnings per share of negative $1.35, below analysts’ consensus expectations of negative $1.06. DraftKings lost more than 8% in Friday morning’s pre-market session, dipping below $41 a share, on the earnings miss. DraftKings later rebounded to around $44 in early-morning trading.
