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DraftKings’ losses accelerate as it prepares for public listing

DraftKings has not made a secret of its need to burn through cash to fuel its expansion.
DraftKings has not made a secret of its need to burn through cash to fuel its expansion.Charles Krupa/Associated Press/File 2019/Associated Press

Financial losses accelerated at DraftKings during the first nine months of 2019 — even as its revenue increased, a result that the Boston sports gambling company said reflects its strategy of aggressively seeking market share in an expanding industry.

The company made its first detailed financial disclosure in documents filed with the Securities and Exchange Commission as it prepares to sell stock to the public.

Last month, DraftKings said it had agreed to a complex merger with SBTech, a gambling technology company, and Diamond Eagle Acquisition Corp., a publicly traded firm formed to finance the deal.

In a Monday regulatory filing associated with the deal, DraftKings disclosed a net loss of $114 million in the nine months ended Sept. 30. The company brought in nearly $192 million in revenue during that time, but those gains were offset by expanding costs.

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During the comparable period of 2018, DraftKings said, it had about $133 million in revenue and a net loss of about $75 million.

The data cover the most recent comparable period available, but they do not include the final three months of the year — football season, an especially busy time for the company,

DraftKings, which made its name as a provider of paid fantasy sports games but has been expanding into legal sports betting and other gambling products, said such losses are to be expected.

“Our strategic focus has been investing in new products and technologies, acquiring and retaining new users and expanding its product offering into new jurisdictions,” said James Chisholm, DraftKings director of global public affairs, in a statement.

Many states are opening up legal sports betting markets following a 2018 US Supreme Court decision that allowed the practice to expand beyond Nevada. It remains illegal in Massachusetts, as state lawmakers have yet to act on legislation that would allow it. DraftKings must contend with huge expenses to compete for a share of the new markets, including regulatory costs, technology spending, lobbying, and marketing.

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“Our path to profitability is based on the acceleration of positive contribution profit growth driven by marketing efficiencies as we transition from local to regional to national advertising, and scale benefits on the platform development component of our cost of revenue,” the company said in its SEC filing.

DraftKings has not made a secret of its need to burn through cash to fuel its expansion. A major component of the deal to take it public was the $500 million that the company will have on hand once the transaction closes, sometime in the first half of this year.

The legal filing also discussed the financial results for SBTech, which is incorporated in Malta but has most of its workforce in Eastern Europe. That company said it had a net income of nearly $7 million for all of last year. That number was lower than in 2018, thanks to rising expenses.

The new company will leave much of DraftKings’ leadership intact. Chief executive Jason Robins will remain in his role — and hold about 90 percent of the voting power of the new company’s capital stock.

According to the filing, Robins made $13.8 million in fiscal year 2018, with most of that coming in the form of option awards.

Shares of publicly traded Diamond Eagle were up about 2 percent since Monday.


Andy Rosen can be reached at andrew.rosen@globe.com.

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