DraftKings CEO Jason Robins said the company has added Kentucky to its 2023 fiscal guidance and estimates that the state will generate $20 million in revenue for the year. During DraftKings’ Q2 earnings call, Robins said the state was not part of previous forecasts. That’s because the company anticipated a later launch date for Kentucky sports betting. The Bluegrass State is set to start taking bets on Sept. 7 at retail locations and online on Sept. 28.
Robins added that DraftKings expects a $30 million adjusted EBITDA loss, assuming a launch date of Sept. 28. That implies that the DraftKings Kentucky launch will cost the company about $50 million. A delayed launch would increase the EBITDA loss, as revenue would decrease proportionally, yet some costs would be fixed.
This $50 million estimate for costs would include setup fees, staff salaries in the state, and the $50,000 license fee. However, DraftKings will likely also spend a significant amount on advertising and promotions as it has in other states, though it’s scaling some of that spending back.
There is still one unknown surrounding DraftKings’ Kentucky launch: its retail partner. DraftKings has a relationship with Churchill Downs through DK Horse. However, Churchill Downs has already partnered with rival FanDuel, so it remains to be seen if DraftKings might search for another partner.
UPDATE: 11/03/2023
During the Q3 2023 earnings call today, DraftKings Co-Founder and CEO Jason Robins said 5% of Kentucky’s adults are DraftKings Sportsbook bettors.
DraftKings (DraftKings 39,49 +2,73%) may appeal to a larger audience, as it follows the state law and allows bettors aged 18 and older to wager. Most operators chose to adhere to the 21 and older guideline suggested by the American Gaming Association (AGA).
Which Sportsbooks Will Be Available in Kentucky?
Kentucky Gov. Andy Beshear signed a sports betting bill into law on March 20, 2023. The law calls for a 14.25% tax on online sportsbooks and 9.75% on retail sportsbooks. The law allows each of the nine racetracks in the state to partner with up to three online sportsbooks, allowing for up to 27 sportsbooks.
While it’s unlikely there will be that many at the start, most of the biggest operators have already announced their intention to launch in the state. One of the first operators to announce a retail partner was Caesars. In May, the company said that it had partnered with Keeneland and Red Mile racetracks.
In June, FanDuel partnered with Churchill Downs, one of the most iconic horse tracks in the nation. More recently, BetMGM partnered with Revolutionary Racing Kentucky. While other operators have not announced their partners, many other familiar brands are expected to launch, including WynnBet, BetRivers, Bally Bet, PointsBet, and Bet365.
DraftKings Posts First Profitable Quarter
While it’s preparing to launch in Kentucky, DraftKings is coming off a strong quarter. The company posted $73 million in earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA). That matched the company’s forecast to break even in Q2, giving DraftKings its first profitable quarter since it went public in 2020.
Other improved Q2 results include:
- Revenue of $875 million, up 88% year-over-year
- A 44% increase year-over-year in monthly unique players (MUPs) to 2.1 million.
- A 33% increase year-over-year in average revenue per MUP to $137. That also marked a rise from $92 in Q1 and $109 in Q4 2022.
Robins also acknowledged the performance of older states, enabling the company to invest in new states like Kentucky. According to DraftKings CFO Jason Park, the handle grew 35% year-over-year in states that have launched between 2018 and 2021. Revenue also increased by 70% in those states, while total unique customers grew by 25%.
Even with the costs connected to entering Kentucky, DraftKings forecasts that in Q4 2023, it will generate $1.2 billion in revenue and between $150 million and $175 million in adjusted EBITDA.
About the Author
