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Rovell: Q&A With DraftKings CEO on Company’s Fiscal 2020 Earnings

Rovell: Q&A With DraftKings CEO on Company’s Fiscal 2020 Earnings article feature image

Marco Bello/Bloomberg via Getty Images. Pictured: DraftKings CEO Jason Robins.

DraftKings reported fiscal 2020 earnings on Friday, which rose 49 percent year over year to $644 million. The market liked the rise, as shares closed up 6.4 percent on the day. We had a chance to sit down with DraftKings CEO Jason Robins to talk the latest about the company and gambling trends.

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Darren Rovell: What’s your biggest surprise of 2020?

Jason Robins: Well, obviously with COVID shutting down sports for several months, it was really interesting to see the pent up demand and the way people came back to sports gambling. That, combined with some legislative momentum in new places, were among our biggest surprises.

Darren: You guys spent nearly $500 million on marketing. There’s always talk about how much is too much, but you are obviously in a huge growth business. How do you gauge spend?

Robins: We look at marketing in the same way we would like at acquiring business by buying a company or if we invest in resources to build some feature in our product. Everything is modeled out and data-driven. With our customer acquisition cost model, we figure out exactly how much a customer is worth and some states are very different than others. We don’t have the same type of market share in Pennsylvania because we’ve spent less because a customer there is worth less to us due to the higher taxes. But the fish are biting in states where we are opening up. People have cut back on so many leisure activities and the truth is we tried to spend even more. We finished lower than our target because we couldn’t find more places to spend in.

Darren: There are so many elements of gambling going on now — flipping sports cards and memorabilia, investing in crypto, the stock market is more wild than ever with what happened with GameStop and AMC. Does the fact that these tend to give people the same highs as sports gambling take away from what you sell?

Robins: Well, a lot of the same dynamics do exist. But we haven’t seen cannibalization. In states that we are doing business in, everything tends to go up, including our iGaming when we have it. It’s all additive because we are in this boom phase. And don’t forget there is so much less consumer spending in travel and leisure and dining out. My heart goes out to those small business and restaurants, but those are massive categories that have shifted consumer spending significantly.

Darren: The company reported that you had a larger hold percentage in the fourth quarter, which contributed in a meaningful way to the bottom line. Anything to that?

Robins: Nope, just random. At the beginning of the football season, we couldn’t catch a break with the favorites and the overs cashing consistently, but it all eventually normalizes.

Darren: You combined with SB Tech in April so that you can have your own platform, but you didn’t shift over yet. What is the timeline for that?

We’re still on Kambi and we’re on track to migrate no later than the third quarter. Kambi is doing well with us and Penn (Barstool), but the outages during the Super Bowl highlight why it’s so important to have your own tech. That being said, the betting volume was at a record high and we were still able to recover. But it’s never fun when it’s not in your control.

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