NASDAQ:DKNG DraftKings Q2 2024 Earnings Report $44.86 +0.82 (+1.86%) Closing price 07/25/2025 04:00 PM EasternExtended Trading$44.79 -0.07 (-0.16%) As of 07/25/2025 07:57 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast DraftKings EPS ResultsActual EPS$0.12Consensus EPS -$0.01Beat/MissBeat by +$0.13One Year Ago EPS-$0.17DraftKings Revenue ResultsActual Revenue$1.10 billionExpected Revenue$1.11 billionBeat/MissMissed by -$8.76 millionYoY Revenue Growth+26.20%DraftKings Announcement DetailsQuarterQ2 2024Date8/1/2024TimeAfter Market ClosesConference Call DateFriday, August 2, 2024Conference Call Time8:30AM ETUpcoming EarningsDraftKings' Q2 2025 earnings is scheduled for Wednesday, August 6, 2025, with a conference call scheduled on Thursday, August 7, 2025 at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by DraftKings Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 2, 2024 ShareLink copied to clipboard.Key Takeaways Strong and efficient customer acquisition: New online sports betting and iGaming customers rose nearly 80% year-over-year in Q2 while customer acquisition costs fell over 40%, signaling robust demand and marketing efficiency. Gaming tax surcharge plan: DraftKings will add a modest surcharge in four high-tax states starting January 1, 2025, to offset rates above 20% and bolster adjusted EBITDA in those markets. Jackpocket integration on track: The acquisition is performing ahead of plan, with DraftKings expecting the deal to deliver positive adjusted EBITDA in fiscal 2025. Ambitious FY25 adjusted EBITDA guidance: The Company reiterated its target of $900 million to $1 billion in adjusted EBITDA for fiscal 2025, driven by ongoing customer growth and cost leverage. $1 billion share repurchase authorized: DraftKings’ Board approved an inaugural buyback of up to $1 billion of Class A common stock, reflecting confidence in free cash flow generation. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallDraftKings Q2 202400:00 / 00:00Speed:1x1.25x1.5x2xThere are 19 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to DraftKings First Quarter 20 24 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that this conference is being recorded. Operator00:00:21I would now like to turn the call over to your speaker today, Alan Ellingson, DraftKings' Chief Financial Officer. Please proceed. Speaker 100:00:29Good morning, everyone, and thank you for joining us today. Certain statements we make during this call may constitute forward looking statements that are subject to risks, uncertainties and other factors as discussed further in our SEC filings that could cause our actual results to differ materially from our historical results or from our forecasts. We assume no responsibility to update forward looking statements other than as required by law. During this call, management will also discuss certain non GAAP financial measures that we believe may be useful in evaluating DraftKings' operating performance. These measures should not be considered in isolation or as a substitute for DraftKings financial results prepared in accordance with GAAP. Speaker 100:01:07Reconciliations of these non GAAP measures to the most directly comparable GAAP measures are available in our earnings release and presentation, which can be found on our website and in our quarterly report on Form 10 Q filed with the SEC. Hosting the call today, we have Jason Robbins, Co Founder and Chief Executive Officer of Draxman's, who will share some opening remarks and an update on the business. Following Jason's remarks, I will provide a review of our financials. We will then open the line to questions. I will now turn the call over to Jason Robbins. Speaker 200:01:38Good morning and thank you all for joining. There are 5 key points that I'd like to focus on during our call today. First, we are achieving strong and efficient customer acquisition. New OSB and iGaming customers increased nearly 80% year over year, while CAC declined more than 40% year over year in the second quarter, a period with no new We anticipate the healthy customer acquisition environment to continue through the back half of the year and possibly beyond, which may indicate that the U. S. Speaker 200:02:07Online gaming opportunity could be even larger than we previously thought. 2nd, we believe we have a reasonable solution for high tax states including Illinois. We plan to implement a gaming tax surcharge in the 4 states that have multiple sports betting operators and tax rates above 20% starting January 1, 2025. We believe additional upside potentially exists for adjusted EBITDA in 2025 and beyond from this gaming tax surcharge. 3rd, the jack pocket integration is off to a great start. Speaker 200:02:38We are on track to hit the multi year guidance for the transaction that we provided in announcement and expect the deal to generate positive adjusted EBITDA in the fiscal year 2025. 4th, we are excited about the future and are reiterating our expectation for $900,000,000 to $1,000,000,000 of adjusted EBITDA in fiscal year 2025. Finally, we said last quarter that we would provide an update on capital allocation. We are pleased to announce that our Board authorized a share repurchase of up to $1,000,000,000 of our Class A common stock. This inaugural authorization reflects our conviction in the strong trajectory of our business and our expectation that we will generate significant free cash flow in the coming years. Speaker 200:03:19I'd also like to emphasize that all of us at DraftKings are very excited for the start of football season. Our product is in a great position as we are continuing to differentiate ourselves by investing in new features and functionality for Sportsbook and iGaming. In Sportsbook, we recently launched in house player prop wagers for NFL, NBA, MLB, NHL, college football, college basketball and tennis. We also broadened our progressive parlays to include spread and total wagers. In addition, we plan to integrate a bet and watch experience with NFL streaming. Speaker 200:03:52In iGaming, the DraftKings and Golden Nugget online gaming apps were ranked number 1 and number 2 overall in a recent third party survey. We are on track to double the number of new games we will release this year compared to last year and recently improved our interface to promote game discoverability. In closing, our business fundamentals are very healthy and we are excited about the second half of twenty twenty four and beyond. With that, I will turn it over to Alan Ellingson. Speaker 100:04:17Thank you, Jason. I'll hit some financial highlights, including our Q2 2024 performance and our updated guidance. Please note that all income statement measures discussed, except for revenue, are on a non GAAP adjusted EBITDA basis. As Jason mentioned, our business fundamentals were strong in the Q2. We generated $1,104,000,000 of revenue, representing 26% year over year growth and $128,000,000 of adjusted EBITDA. Speaker 100:04:43Importantly, customer acquisition exceeded our expectations as new to DraftKings, OSB and iGaming customers increased nearly 80% year over year. Customer retention and engagement were healthy and resulted in a handle that exceeded our expectations. Handle was strong even with fewer than anticipated NBA playoff games. Structural sports percol percent improved year over year in line with our expectations to approximately 10%. Adjusted gross margin for the 2nd quarter was 43%, primarily due to better than expected customer acquisition and the corresponding promotional reinvestment. Speaker 100:05:18Operating expenses, including sales and marketing, products and technology and general and administrative expenses were consistent with our expectations as we continue to balance revenue growth with operating efficiency across the organization. Moving on to our fiscal year 2024 guidance. We now expect revenue in the range of $5,050,000,000 to $5,250,000,000 from a range of $4,800,000,000 to $5,000,000,000 The updated range equates to year over year growth of 38% to 43%. The increase in revenue guidance is driven by strong customer acquisition, engagement and retention trends for our existing customers, as well as the inclusion of Jackpocket in our recent launch of Sportsbook in Washington, D. C. Speaker 100:06:00We are also revising our fiscal year 2024 adjusted EBITDA guidance to $340,000,000 to $420,000,000 from the range of $460,000,000 to $540,000,000 The revision takes into account Illinois raising its sportsbook tax rate, strong new customer acquisition expectations, as well as the prior mentioned inclusion of Jack Pockett in our recent sportsbook launch in Washington, D. C. For fiscal year 2024, we now expect our adjusted gross margin to increase modestly. We expect sales and marketing expense to increase at a mid to high single digit rate year over year. The increase is primarily due to the investments in Jackpocket brand. Speaker 100:06:37We continue to expect the bridge between adjusted EBITDA and free cash flow to be approximately $100,000,000 based on approximately 120,000,000 Speaker 300:06:46dollars of annual Speaker 100:06:47capital expenditure and capitalized software development costs, as well as a modest source of cash from changes in net working capital combined with interest income. And we continue to expect 2024 stock based compensation expense to be flat to down in dollar terms on a year over year basis and represent approximately 7% of revenue in fiscal year 2024. Looking ahead to fiscal year 2025, we continue to expect adjusted EBITDA in the range of $900,000,000 to $1,000,000,000 due to our underlying business momentum, including the benefit of higher customer acquisitions in the second half of twenty twenty four. We believe additional upside potential exists when we apply the gaming tax surcharge in those noted high tax states that have multiple online sportsbook operators, which we are not including at this time. We expect to provide more details on our fiscal year 2025 guidance with our next earnings report in November. Speaker 100:07:35That concludes our remarks. We will now open the line for questions. Operator00:07:39Thank you. Our first question comes from David Katz with Jefferies. Your line is open. Speaker 400:08:02Thank you and good morning. I appreciate all the information. What I was really hoping to do was just talk about the surcharge for a moment, which is an interesting strategy and how you thought about the degree to which competitors may or may not follow and how you react under those circumstances? Just fleshing out the strategy a bit more would be really helpful. Speaker 200:08:35Thank you, David. Great question. I think every company has to do what's best for their own business. I think we believe this is what's best for us. And I would imagine that if that's our calculus, then others would come to the same conclusion, but we really don't know and we'll have to see. Speaker 200:08:54And obviously, there might be other ways too that other ideas for how to implement something like this that might be better than what we came up with. We thought through this quite a bit, but you never know. So, we do have some time between now and Jan 1st and we'll see what happens. Speaker 400:09:14Right. Interesting. And as a quick follow-up, just with respect to putting the surcharge aside, if we think about the impact that we should be reflecting in our models for Illinois, assuming no surcharge, any help, Alan, as to how we might sort of think through that impact and include it for the future? Just a lot going on in there. Speaker 200:09:44I'll answer quickly and then Alan can add any detail. But I think the best way to think about it is the over performance that we are seeing with customer acquisition, the launch of Washington, D. C, our expectation for Jackpocket to deliver positive EBITDA next year as well as underlying trends with our existing customers outperformance on the handle side all should offset the Illinois tax increase next year. So even if we don't get any benefit from the fee, we will see still $900,000,000 to $1,000,000,000 in adjusted EBITDA next year. Speaker 400:10:22Okay. Okay. Thank you very much. Operator00:10:25One moment for our next question. Our next question comes from Shaun Kelley with BofA. Your line is open. Speaker 500:10:34Hi, good morning everyone. Jason or Alan, I think a lot of the rest of the subject of the sort of update here is about the increased customer acquisition environment, obviously some of the continued investments you're making. So the impact here seems to be the net is obviously higher revenue expectations and lower profit flow throughs. Specifically asking about kind of 2025 to start, just the implied guidance right now some reacceleration. You haven't I don't think you've given explicit revenue guidance. Speaker 500:11:07That seems to be kind of the undertone here. So what in your mind would kind of cause the environment to change from where we're at today? And if it doesn't, what would some of the offsets potentially be for DraftKings as we kind of move into next year? And let's say, the customer acquisition environment remains rich and you continue to see strong adds there? Thanks. Speaker 200:11:27Yes. It's a great question. Just to explain a little bit about what's going on. 1, even if we didn't spend another dime of marketing, new customers get new promotions. So you're right that adds a drag on revenue and EBITDA. Speaker 200:11:42And we're seeing enough outperformance on the revenue side elsewhere that while it certainly hit the bottom line a little bit or will for the remainder of the year, it didn't actually we're still seeing improved revenue. So that just kind of demonstrates I think the underlying strength of the business and the customers that we're seeing. So when you kind of put all that together next year, we do expect to get a little bit more revenue because we'll need that to offset in order to make the math work that's needed to offset the Illinois gaming tax increase. So that's kind of how you get to the $900,000,000 to $1,000,000,000 And then any And then as far as the potential for a hot customer acquisition next year, And then as far as the potential for a hot customer acquisition next year, that can always happen. Right now, we feel we've built in some degree of the increased trends we're seeing. Speaker 200:12:40And obviously, a lot of that will depend on if there's more state launches and things like that. So, I think you could sort of think of this as a same state basis type of thing again. And obviously, if there's more state launches next year and more customer acquisition investment, then that might change things a bit. But that just means bigger numbers longer term over the following years. So I think that's the right way to think about it. Speaker 200:13:03But as of today, I see no reason to think that on a same state basis, we wouldn't be able to deliver $900,000,000 to $1,000,000,000 in EBITDA in adjusted EBITDA next year. Speaker 500:13:12Thank you. Operator00:13:14One moment for our next question. Our next question comes from Our next question Speaker 300:13:21comes from Stephen Grambling with Morgan Stanley. Your line is open. Hi, thanks. Just want to maybe follow-up on Sean's question, but ask in a different way. Are you seeing any change in the cost to sustain and engage existing players? Speaker 300:13:31And also on the new customer acquisition, is that primarily coming from new states? Are you still seeing even greater uptick from existing states? Speaker 200:13:40So we are not seeing an increase in the existing player cost. It's all new player driven and mix driven, so meaning mix of new players to existing. And interestingly, it really is across the board. So certainly, we got some boost from North Carolina having launched in late Q1. But if you remember last year, we had 2 big states, Ohio and Massachusetts launch in Q1. Speaker 200:14:04So this year there were less new state launches around this time frame and none in Q2. We did have DC launch recently, but that didn't affect the Q2 numbers that was in July. So really it has to come from existing states if you look at it that way. And then it's really across products too. We did see some particular strength in the Golden Nugget brand as we migrated on to the DraftKings platform and product. Speaker 200:14:28We definitely saw a boost in conversion and got some lift on there. But really it's been across states, across products. Speaker 600:14:37Thank you. Operator00:14:38One moment for our next question. Our next question comes from Joe Greff with JPMorgan. Your line is open. Speaker 700:14:48Good morning, everybody. Jason, just wanted to ask on the higher new user acquisition cost plans in the second half of this year. How much of this is offense, meaning to grow the new user base versus defense versus impacting the competition? And then my follow-up to that is, you mentioned that presently the customer acquisition environment is healthy. What if that environment changes to the downside? Speaker 700:15:17How do you react? How do you pivot? Speaker 200:15:20Yes, great questions. I mean, we I think have been very consistent in that we don't react competitively. We make decisions based on our 3 year payback rule and what our data says our customer acquisition spend is returning. So as we noted, we had an over 80% increase and almost, excuse me, 80% increase in new players in Q2 year over year and an over 40% CAC decline. I mean, those are just massive numbers, right? Speaker 200:15:46So when you're me looking at those numbers and your marketing team is coming to you and saying we can deliver more productive spend with the same type of results, It's hard to say no to that, right? And we've been monitoring cohort quality closely. I mean everything looks really, really solid. So I think it's just a particularly strong environment right now. The market is growing quickly. Speaker 200:16:08I think it's just really you got to fish when the fish are biting, so to speak. So I think that's the way to think about it. It's absolutely offensive and really more so just kind of following the data. And by the same token to your second question, if it goes the other way, we'll follow it back the other way. So the good news for us is the vast majority of our marketing spend is flexible. Speaker 200:16:31We can move in and out of it very quickly. A lot of it's digital. Even the TV, we can move out of it in a matter of days usually. So really it's quite easy for us to make adjustments as we see what's working and at what levels. And same way that when the data is telling us we should be investing deeper because the paybacks are really strong. Speaker 200:16:49If we start to see the opposite or if we start to see a decline in cohort quality, we can easily adjust there. Speaker 700:16:56Great. And Alan, once you start becoming a cash taxpayer with the gaming, what's the corporate tax, cash corporate tax rate in 2026? Speaker 800:17:05We'll probably start paying a minimum amount of cash taxes in 2025 and 26, but we don't expect to run through all of our NOLs until 27 or 28 at the soonest. Speaker 200:17:16Thanks, Ed. Operator00:17:18One moment for our next question. Our next question comes from Clark Lampkin with BTIG. Your line is open. Speaker 900:17:27Good morning, everyone. Thanks for taking the question. Jason, I want to come back to the sort of customer acquisition topic and the comments you made around existing state performance. I'm curious, I guess, in essence of obvious changes, I guess, from last quarter to this one, from like a launch dynamic standpoint, what's creating, I guess, the sort of more favorable environment that you're leaning into? Is it sort of more of a push factor where cats have come down enough where it makes sense to spend more and you can actually reach customer cohorts that you weren't previously addressing? Speaker 900:18:01Or is something sort of ticked up in terms of interest that suggests that TAM maybe really is expanding at a faster pace than we expected right now? Speaker 200:18:11Yes, it's a great question and hard to exactly pinpoint, I think it's a combination of both the things that you said primarily. So one, as we've increased our state footprint, we've talked about this for years now, how this is kind of the gift that keeps on giving. We see the same cost from a national marketing perspective, regardless of how many states we're operating in. But the bigger your footprint, the more bang for your buck you're getting for it. So as we've grown our state footprint, you're absolutely right. Speaker 200:18:39It just continues to improve our efficiency, which allows us to unlock the ability to reach a little bit deeper and spend a little bit more in pockets that weren't meeting our payback thresholds previously. Secondly, I do think that there's just a ton of momentum in the industry right now. Lots of buzz coming up with NFL season. It's only going to get bigger because this is the most busy time of year for us typically from a customer acquisition perspective, I guess the Super Bowl, but the whole NFL kind of NBA, that whole fall timeframe is usually the biggest overall period. And really I see no reason to think that that's going to slow down. Speaker 200:19:16Obviously, as noted earlier, we're going to be very closely monitoring the data. And if we see any changes, we'll adjust our spend and adjust our approach. But right now, I think if anything, you'd expect it to build because we're in really the least busy time of year, and we're still seeing very strong customer acquisitions. So I don't know why that would slow down going into the busiest time of year. Speaker 900:19:37Understood. I have a follow-up also for Alan, I guess, on the repurchase that was announced today. Alan, you guys just wrote a fairly large check for Jackpocket. There have been some rumors of other sort of smaller scale deals. Football season last year was a pretty good reminder of result swings and the potential for sort of intra quarter outflows. Speaker 900:19:58Is it fair to think that I guess utilization of that buyback authorization might be more of a 20 5 event? And if so, is this something that's going to be more formulaic in nature? Or would you hope to be a little bit more tactical and take advantage of bigger dislocations, I guess, in the stock price? Thank you. Speaker 800:20:18I think we anticipate being able to buy back the $1,000,000,000 of Class A shares over the next 2 to 3 years. We would like to be ideally be formulaic with it, create some consistency, but I do expect it to take more than just the next little while to get fully finalized. Yes. Speaker 200:20:38And it will be a mix. I mean, we'll have certainly some flexibility as you noted to take advantage of any dislocations in the share price. But as Alan noted, I think the bulk of it will be formulaic. Speaker 900:20:54Thank you. Operator00:20:55One moment for our next question. Our next question comes from Robert Fishman with MoffettNathanson. Your line is open. Speaker 1000:21:04Hi, good morning. Curious, are you guys seeing any signs of consumer weakness in your some of your older states maybe? And how would you think about the impact on OSB and iGaming if we see any more macro headwinds in the next couple of quarters? And then shifting gears a little bit, given the expected integration of the Bet and Wash experience with the NFL streaming, curious, did you see anything last year, some of your competitors did, I think, have this functionality. So anything that you learned last year about the NFL season that pushed you into this product enhancement? Speaker 1000:21:40And any early thoughts about exploring these rights for the NBA? Thank you. Speaker 200:21:47Yes. I think on your first question, we're seeing absolutely no signs of any weakness in the consumer whatsoever. Hard to know how much of that is unique to our industry versus macro. But really on our end, we're seeing super strong healthy cohort behavior across the board. And as noted, customer acquisition is really at an all time high as well. Speaker 200:22:09So everything looks really good on that front for us. On the Bet and Watch side, it wasn't really that we saw anything last year and anything our competitors did. It was more that we wanted to do this all along. It's a great thing that we think will add a lot of value to our customers doing live betting, just didn't make the cut. We had so many other great things that we were trying to get done last year. Speaker 200:22:30And I think to do it in a sort of haphazard way wasn't our style. We want to do it right. So we really want to make sure it wasn't just some kind of hacked together integration of a video feed, but it was a true experience that we are creating because if somebody tries it, we want them to say is great and come back and you only get one shot at a first impression. So I think we felt like between the other things that we had on our roadmap and our desire to make sure we did this in the right way, we decided it would be better off for this coming season. Operator00:23:03Thank you. One moment for our next question. Our next question comes from Ben Miller with Goldman Sachs. Your line is open. Speaker 1100:23:12Thanks for taking the questions. I guess just back on the gaming tax surcharge, can you just talk about the thought process behind using a surcharge as the mitigation measure as opposed to a more discrete lever? And then are there any insights you can share around customer behavior from any AB testing that you might have done in advance of announcing this? Thanks. Speaker 200:23:36Sure. So definitely discussed and thought there are a lot of different ways of doing it. And as I said, some better idea comes we're open to it. I think the important thing is that, if you look at sort of the way it's typically done in other industries, whether it be hotel taxes or even the sales tax that you pay when you buy something at the store, taxis, you name it. It's typically line itemed out separately and usually 100% passed along to the consumer. Speaker 200:24:08In this case, we're obviously subsidizing a chunk of it. So we just thought that was most sort of in line with how it's typically done versus trying to obfuscate it, which also isn't consistent with our commitment to be transparent to our customers and be very customer friendly in everything we do. So, I know there's maybe benefit to hiding it because maybe people don't notice. But I think over the long term, customers appreciate transparency. And even if they don't love their state implemented a high tax and some of that is being passed along. Speaker 200:24:40I think they prefer that to not knowing if it were buried in the pricing or something else. Speaker 1100:24:48Was there any AB testing that you guys done that you could share any customer behavior from that? Speaker 200:24:55No, we haven't. We actually still there's work to do to implement it. And I think it's hard to AB test something like that. What we are doing is we're launching in 4 states. So we'll certainly see the impact there. Speaker 200:25:09And obviously, it won't be a perfect AB test, but I think that we have enough comparable data from other states and enough of an understanding of what we would expect from consumer behavior that I think we'll have a pretty clean read on the impact. But it is a nominal amount. If you look at the materials we provided in the investor presentation, for Illinois, for example, if you need a $10 bet to win $20 it would be a $0.37 ish $0.30 something, I forget the exact number charged. So obviously some people might just react negatively to the idea of being charged at all, but it's really fairly nominal And it makes a huge difference in our ability to make a reasonable margin and also more importantly to compete with the illegal market, which pays no taxes and has the ability to invest 100 percent of their revenue into product and other things. So for us to be able to be competitive with the illegal market and invest properly in product and customer experience in a state that has a very high tax rate, we feel is an important step that consumers will ultimately understand. Speaker 200:26:13And if they feel the product and experience is better, then they'd rather pay for that than somewhere else that maybe doesn't have as strong a product. Speaker 1100:26:21Great. Thanks so much. Operator00:26:23One moment for our next question. Our next question comes from Robin Farley with UBS. Your line is open. Speaker 1200:26:31Thanks. Yes, I wanted to ask when you think about strategy in Latin America, is that something you would pursue sort of organically or something that you might look to use M and A to get a stake in that market? And then just a quick follow-up question on the earlier commentary about the increased acquisition, customer acquisition. Your market share looked pretty consistent year over year. I guess, how should we think about what's the time lag between the higher customer acquisition and that showing up in the market share numbers? Speaker 1200:27:05Thank you. Speaker 200:27:07So a couple of things. One, answer your question on Latin America. We would probably not do it organically if we were to pursue. It would be through M and A. That said, we don't currently have any plans to do that either. Speaker 200:27:21I think we're really focused as we've noted in the past on winning the U. S. Online gaming opportunity. In fact, just in the last couple of months, we divested Viesen, we shuttered Rainmakers. So I mean, we're more focused than ever on our core. Speaker 200:27:36And I think that's just been a mantra and a theme throughout the company is focus, focus, focus. So definitely want to make that point. But were we to do something, I think it would likely be through M and A for that very reason. We don't want to take a big chunk of our brain trust here and distract them with something like that. And then, I'm sorry, second question on share. Speaker 200:27:57So hard to know exactly, because I would assume that if we're seeing robust customer acquisition then our competitors are as well. So I don't know if that's unique to us. If it were unique to us, it should show up pretty quickly within a quarter or 2 of acquiring the customers. But I think the caveat is my guess is that the entire market, the entire industry is experiencing very strong customer acquisition right now because, well, I guess there could be some things like in the case of the Golden Nugget migration that we're getting a little bit of an extra boost from. But for the most part, we're seeing it across states, across products. Speaker 200:28:33So I think it's more of a macro industry trend as much as anything else. Speaker 1200:28:38Okay, great. Thank you very much. Operator00:28:40One moment for our next question. Our next question comes from Dan Politzer with Wells Fargo. Your line is open. Speaker 200:28:47Hey, good morning, everyone. First one, in terms of that stronger customer acquisition, retention and engagement, if I just look at your slide deck, it's a positive revenue of about $177,000,000 but a drag in terms of EBITDA. That compares with your Q1 where both of those figures were positive, right? They would add incremental adjusted EBITDA. So I guess the question is, is there any way to kind of break out this the $23,000,000 EBITDA loss or as part of your bridge as it relates to better monetization of existing customers versus maybe the drag of acquiring new customers? Speaker 200:29:24Yes. It's a great question. I mean, I think that the best way to think about it is if you assume that the incremental revenue from existing customers flows through somewhere in the 50 ish percent range, maybe a little bit higher, but somewhere around there, then you can kind of back into what comes from each. Got it. And then just from the call. Speaker 200:29:46And the other thing I'd note too, and I just want to make sure people understand this as well because I think it's an important point. When we talk about revising EBITDA guidance and incremental customer acquisition cost, Even if we didn't spend any more money on marketing, new customer promos come from just more customers coming in. So if we under forecasted, which in this case we did, the number of new customers that we expect to acquire this year, then even if we spent 0 more dollars on advertising on marketing, we would still see a headwind, which is in that line, you're mentioning from new customer promos because just more people signing up means more new customer promos. So that's a good thing. It's not a bad thing. Speaker 200:30:32Obviously, it creates more profit over the long term. But it's something that really is not within our control. And I think a good long term element of what we believe is a large and growing TAM. But in the end, unless we took away new customer offers, which we would never do, that's something that we can't really control. Got it. Speaker 200:30:55And then just quickly for my follow-up on the surcharge. In those states that you're going to implement that, are there additional steps that you're going to implement as well, such as marketing reductions or any other levers you can pull in Illinois, New York, Pennsylvania to maybe offset some of the higher taxes? Yes. I think part of the idea is to do this in place of that, so we can continue to invest in the state. I think New York is a great example where everyone all companies have including DraftKings have pulled back heavily on promotions and in state marketing investment. Speaker 200:31:32And I think that's fine. That's one way of doing it. But another way is to say, look, I'm going to adjust so that we're effectively at a 20% tax rate, which is in line with a lot of other states and I'm going to invest at the level that I would invest in a 20% tax rate state. We'll have to see which one works better, but my guess is that that's going to work better because it allows us to make the investments in product and promotions and marketing and all the other things that should continue to create long term growth. Thanks so much for all the detail. Operator00:32:09One moment for our next question. Our next question comes from Joe Stauff with SIG. Your line is open. Speaker 1300:32:16Okay. Thanks. Good morning, Jason and Alan. Two questions, please. I wanted to see if you could, Jason, sort of describe, say, the iCasino first opportunity at this point. Speaker 1300:32:28You have GNOG fully ramped out and launched. And in particular, was it a material contributor to your MUP growth? And then the second piece is, just wanted to ask about, say, the economics of customer acquisition in existing states. We're aware obviously of that initial golden cohort, but just wondering how and what you've seen in terms of the economics and the LTVs for all the cohorts after that, whether it be year 2 versus year 3 and so forth. I guess the main question is like in year 2 year 3 based on what you can observe, are the economics very different between them? Speaker 1300:33:17One would think over time it'd be lower, but I was just wondering what you're observing. Speaker 200:33:23Yes. It's a great question. So starting off, as we noted, we're seeing customer acquisition outperform really across the board really states and products alike. That said, GNOG has been a bright spot ever since we migrated onto the DraftKings products and platform, which is a much more positive customer experience, better conversion flows, all those sorts of things, we have definitely seen GNOG spike. So that was a material contributor for sure. Speaker 200:33:53It's still relatively small compared to DraftKings, but we're very excited about the potential for that brand and the growth that we're going to see there. So more to come there, but definitely an important contributor to the outperformance on customer acquisition. And then the cohort question, we've noted this in the past as well. For sure, as time goes on, you see some decline in cohort quality. It's a thing that we look at every single day and it's not just a matter of time. Speaker 200:34:23Obviously, time is one factor, but you also see different LTVs based on what sport you acquire a player on or whether a player gets acquired onto iGaming versus onto OSB 1st. There's a number of different factors that we have noted that definitely drive differential LTVs. Obviously, the state that they're acquired and play in based on tax rates and other elements like whether there's iGaming. So lots of complex variables that go into how we look at LTV. But certainly one of them is that there is an underlying quality of the player that declines as time goes on because of course you're going to get your strongest players in the 1st year or 2 of a state launch. Speaker 200:35:01So that is something that we factor in. We closely monitor it. It tends to asymptote out after a little bit of time. So it's not like it just perpetually declines. Usually you kind of get that 1st year or 2 depending on the state, where you get the strongest players and then it kind of flattens out. Speaker 200:35:16But, no doubt, players are getting a few years in are weaker than the players you get day 1. Thank you. Operator00:35:24One moment for our next question. Our next question comes from Carlo Santarelli with DB. Your line is open. Speaker 1400:35:35Hey, everybody. Good morning. Speaker 200:35:38Good morning. Speaker 1400:35:38First off, I just wanted to clarify something as it pertains to the 80%. The 80% growth in customers, does that include the draft the Jackpocket customer base? Speaker 200:35:54No. That's just new customers onto the DraftKings brand. Oh, and Gene Aug as well. Speaker 1400:36:00In GeneHogg and Draft. Okay. That's helpful. And then secondly, just to follow-up, Jason, on your response to, I believe it was Dan's question around the $177,000,000 of net revenue and the $20,000,000 I know you said 50% flow through on the existing customers. Is it fair to more or less estimate that the existing customers are likely generating, call it, more than $177,000,000 of incremental net revenue as the new customers would carry kind of negative net revenue through the rest of this year through the payback period and hence the math is kind of like 200 to 300 from new customers and then looked at the other way, you take 50% flow through for the EBITDA and look at what the delta is on the acquired customers. Speaker 1400:36:56Is that accurate? Speaker 200:36:58That's close. So new customers that we acquired say in Q2 will definitely generate positive revenue by the end of the year. But their new customer promo will also be a significant chunk of the play. It's what is it about 3 or 4 months after customers acquired that they so depending on the timing, many of them will be negative this year, but some would get positive. So it's a little bit complicated to think about. Speaker 200:37:28But the best way that I would think about it is separate out instead of thinking of it at the customer level, think of it as we're spending X more promo dollars because of new customers. And those promo dollars are going to flow through somewhere around 90% to the bottom line. And that's how you can back and then the rest of the revenue, the positive revenue flows through in the 50s and that's how you can back into it. Speaker 100:37:55Got it. Speaker 1400:37:55Okay. That makes sense. Thank you. Operator00:37:58One moment for our next question. Our next question comes from Bernie MacDrayan with Needham and Company. Your line is open. Speaker 300:38:07Great. Good morning. Thanks for taking the questions. Maybe just to start sticking on the EBITDA bridge for 'twenty five or moving over to 'twenty five. How much of the stronger customer acquisition retention engagement that line that's offsetting the Illinois, how much of that is really truly existing customers versus customers that you've acquired this year? Speaker 600:38:29Sorry, say it one more time. Speaker 300:38:31Yes. In the EBITDA bridge, so Illinois is a big negative and then the big offset is the customer retention engagement line. So I want to know how much of that is driven by truly existing customers that you acquired before this year and better outperformance there versus the customers that you have been and expect to acquire this year? Speaker 200:38:55This is 2025, right? Yes. Speaker 300:38:58For the 2. Exactly. Speaker 200:38:59Okay. I don't know proportionally how it breaks out. Do you know the answer to that? Speaker 800:39:07We won't break it out for this call, but disproportionate amount of it is the existing customers. New customers tend to ramp up over time. So you can assume that it's a little bit heavier on the existing customers and the performance on the retention and the engagement of our existing customers and less on the new customers, which we're still exploring the value of. Speaker 300:39:27Okay, perfect. And then, just given the focus on higher tax rate states, is the contribution profit margin significantly different in those high tax rate states versus the lower ones? Speaker 200:39:44Well, pre instituting the fee, definitely the contribution margin is different because even with reduced promo and marketing, you still can't like I mean it depends on the state, right? I guess New York is probably the one I'm thinking of when I'm answering your question. 51% tax on gross revenue is just you can't overcome it to a point where it's going to be in line with the other states margin wise. But obviously, it depends on the state. In some states that are closer to that 20%, we can call back most of it through promo and reduced advertising. Speaker 300:40:23Okay. Thanks, Jason. Thanks, Alan. Operator00:40:26One moment for our next question. Our next question comes from Jed Kelly with Oppenheimer. Your line is open. Speaker 1500:40:35Hey, great. Thanks for taking my question. Just circling back on the surcharge, maybe a different way to ask it. What would cause you not to potentially implement it? And then just real quickly on hold, some of the hold trends are obviously different, But have you seen any change in how you view your structural hold or your parlay mix or are you changing like, hey, it's more important to drive engagement than to maximize hold? Speaker 1500:41:05Thanks. Speaker 200:41:07Yes, great question. So as of now, I don't think there would be any reason that we wouldn't implement it. But obviously, we're paying close attention to customer feedback. And if we hear anything that makes us change our mind, we'll certainly let you know. I think on the hold side, we continue to focus very much there. Speaker 200:41:26I think it's largely still a bet mix thing. Certainly, we feel like there's a ton of room to increase our parlay mix and increase our average leg count still. So team is very focused on that. I think we're also focusing on other parts of the bedding platform as well such as live betting. So, it's a little bit more balanced probably than I think maybe last year where it was just all about whole rate and bet mix, but we're still very focused on bet mix. Speaker 1500:41:56And then just real quick, anything to call out on shutting down Rainmakers in terms of EBITDA drag or headwind? Thanks. Speaker 200:42:05Yes. Rainmakers is fairly immaterial. So I wouldn't factor it in, in any way. I think for us, it's really just about eliminating a distraction and potential risk. And as I said earlier, I think the mantra around the company has been focus, focus, focus. Speaker 200:42:21Let's go win the U. S. Online gaming opportunity and maximize the amount of profit we're driving in that space. And I think that's what we're focusing on right now. Speaker 600:42:30Thank you. Operator00:42:43Our next question comes from Barry Jonas with Sherwood Securities. Your line is open. Speaker 900:42:48Hey, guys. We've seen a number of states starting to react to the offshore market by banning the VIBADA. Do you see these actions as meaningful to combat the illegal market? Speaker 200:42:59I think so. I mean, right now the illegal market, particularly in the iGaming space ironically is bigger than ever. I think consumers don't know oftentimes what's legal and what's not. They don't know if it's legal in their state. And there's just 0 controls put on these companies that make sure that they're not marketing to minors and other sorts of things. Speaker 200:43:24So I do think it's a big issue and it's good to see the regulators starting to focus on it. And the thing is that there's so much pent up demand and there's so many people that would prefer to bet in the legal market that I think you're seeing growth despite the fact that there's still a ramp into legal market. But for sure, a lot of the current TAM is still tied up there and both for the long term health of the industry as well as for making sure that states are maximizing their revenues and their purpose for doing this, which is to regulate and protect consumers. I think it's absolutely essential that that continues to be a focus. So I'm happy to see it and hopefully we'll see more of it. Speaker 200:44:06Great. Thank you. Operator00:44:07One moment for our next question. Next question comes from Ben Chikane with Mizuho. Your line is open. Speaker 1500:44:18Hey, thanks for taking the question. 2 very quick product questions. I guess on integrating I would imagine integrating Zap Pocket into the DraftKings app would be another significant customer acquisition opportunity. I guess, 1, do you agree? And 2, if so, any color on timing? Speaker 1500:44:34And then on the Bet and Watch integration, will that require users to have access to the games themselves? Or will you have an opportunity to kind of tactically subsidize that anyway? Thanks. Speaker 200:44:44I think the bet and watch is just included. So is that correct? It's not yes, there's no additional charge for it. So it's a feature that customers will have just by being a part of the DraftKings user base. And then sorry, what was the first question? Speaker 200:44:59Jackpocket, yes. So we do plan on integrating those products into DraftKings as well as integrating DraftKings Casino and OSB products into Jackpocket. Timing, we haven't quite determined yet. I think in the past what we said and I kind of echo is, we long term to have all of our products available through all of our brands. And exactly when we implement those things directly versus when we have more linkage through brand to brand cross sell will depend on other priorities and how that slots into our product roadmap, but we definitely do plan to do that at some point. Speaker 1500:45:38I guess just as a very quick follow-up, would you agree that integrating it would be a significant kind of customer acquisition, catalyst for other portions of the business? Or do you think you've already acquired those customers, if that makes sense? Speaker 200:45:50No, we definitely haven't acquired all those customers. So I agree it would be and that's the reason we're planning to do it. I also think that in the interim, we continue to see Jackpocket as a great vehicle for acquiring those customers and cross selling them into DraftKings. But we know from experience that having a fully integrated product is always going to yield stronger conversion and stronger cross sell. So no doubt you're correct that that will be a boost. Operator00:46:17Thanks. One moment for our next question. Our next question comes from Brent Montour with Barclays. Your line is open. Speaker 1600:46:27Hi, good morning everybody. Thanks for taking my question. So one more on the surcharge. Just thinking through the potential outcomes of that plan, especially if nobody follows suit. We would think that would affect the larger players, the VIPs more. Speaker 1600:46:47And at the same time, you're accelerating your customer acquisition and penetrating more customers in your existing states. Is there a thought that this would potentially move you more to a recreational mix? And could that actually help hold longer term? Speaker 200:47:05Yes. It's a great question. Certainly, I think that players betting multi leg parlays and things like that are going to be less sensitive because the payout is already very large. So I get that. I hadn't really thought about how it might affect I mean, we're hopeful that our product and the investment we're making in our customer experience is strong enough that we get players across the spectrum and they view us as being worth maybe paying a few extra cents on a bet. Speaker 200:47:33But certainly, we'll have to see how that plays out. And it'll be something just like everything where we look at the data and we decide what we do accordingly. I do think that if you run the math, it would take quite a bit of top line deterioration to make it not worthwhile from a bottom line perspective. So I'm optimistic, but we'll have to see and we'll have to follow whatever the data and analytics tell us to do. Speaker 1700:47:58Great. Thanks for that, Jason. And then Speaker 1600:47:59just a follow-up on Jackpocket, just piecing together some of your comments, you're investing more in marketing this year in Jackpocket. The integration sounds like a little bit more longer term. So what gives you confidence that you're going to inflect positive in your 2025 guide in your in that you laid out in your deck? I'm just trying to understand some of the drivers there. Speaker 200:48:24Well, really it's the revenue growth we're seeing right now on Jackpocket that gives us confidence we'll be able to achieve adjusted positive EBITDA in 2025. So, they've been really doing well from that standpoint. Also as a reminder, they have an extremely low CAC. So, while we are investing more in, we get a lot of customers for that. So definitely makes a big difference in their revenue ramp as well. Speaker 200:48:53So I think all signs point towards them being a positive contributor to adjusted EBITDA in 2025 and beyond. But obviously, we'll have to see how the back half of the year plays out and we'll have more of an update on that in November. Speaker 1700:49:05Great. Thanks everyone. Operator00:49:07One moment for our next question. Our next question comes from Jason Bender with Citizens JMP. Your line is open. Speaker 1500:49:17Hey, Storn. Thanks for taking my questions. I want to talk on your market access agreements. There's obviously not much room to move in some states like in New York and Oregon, but has the supply demand dynamic changed to the point that states with unused skins can maybe act as a renegotiation tool and be a serious lever to drive cost savings over the long term? Thank you. Speaker 200:49:45I think there's probably some room there. Most states we feel we have pretty good deals in already. So, I don't think there's ton where we feel there's a lot of optimization, but I think there's probably some optimization. And it'll be a little bit longer term because most of the deals we struck are very long term deals. So like 7 to 10 year deals. Speaker 200:50:10But I do think as they start to come up, there will be states that have a lot of open skins. And just like anything, it's a supply demand thing. And I think also even though we got great rates, many of the early states were before I think we really established the level of place in the industry that we have. So I think that will hopefully help a little bit too. Speaker 1800:50:35Thank you very much. Operator00:50:37One moment for our next question. Our next question comes from Ryan Sigdahl with Craig Hallum Capital Group. Your line is open. Speaker 600:50:47Hey, good morning guys. Looking at Slide 10, the MUP increased sequentially, normally kind of flattish quarter given seasonality, up almost $1,000,000 Are you able to break out how much of that was Jackpocket versus just organic DraftKings and Golden Nugget acquisition? Speaker 200:51:05It was mostly Jackpocket. Obviously, the new customer acquisition boosted it too, but given the substantial size of their database, it was mostly jackpot. No? No. Oh, I'm sorry. Speaker 200:51:18It was not. I got that wrong. Half and half. Okay. I stand corrected. Speaker 200:51:23Thankfully, I have people with better data than I have in my brain apparently next to me. So it's about half and half. Speaker 600:51:30Thank you. Good luck, guys. Operator00:51:32One moment for our next question. Our next question comes from Michael Graham with Canaccord. Your line is open. Speaker 1400:51:41Thank you. Jason, I just wanted to ask about your thoughts on the product and the platform as we head into the NFL season. Obviously, you don't have the tremendous like upside from introducing same game parlays that you had, but you have the bed and watch feature. But just wanted to kind of hear any comments you're willing to share on how you think the product will perform in this important seasonal period here coming up? Speaker 200:52:07I think, I feel really excited about the product we have going into NFL. A lot of the work we've been doing over the last several months has been more back end performance stuff. So things that maybe aren't as immediately obvious because they don't show up like front end features, but things like making sure that pages load faster, making sure that the app crashes less, making sure markets are up for longer and we have less time where markets are locked or unavailable, adding new bet types, bringing in house our pricing and trading for many new sports and also launching things like cash out for same game parlay. So we have a lot of really exciting new stuff. We expanded progressive parlays to include new types of bets as well. Speaker 200:52:51So and more to come. Obviously, Bet and Watch hasn't launched yet and we have a number of other features that we haven't announced that we have planned for the coming months. A lot of what we do, really all of what we do revolves around a calendar starting in the fall. So the team thinks about it as what do we want to ship in the August September timeframe and how do we then starting at the beginning of the year orient our entire product road map and calendar around that. So a lot of the product that we ship is going to be done over the next 3 to 6 weeks. Speaker 200:53:24And I think you'll see a lot of new stuff pop up as season approaches. Speaker 300:53:29All right. Speaker 1400:53:29That's exciting. Thank you. Operator00:53:31One moment for our next question. Our next question comes from Chad Beynon with Macquarie. Your line is open. Speaker 600:53:40Good morning. Thanks for taking my question. Jason, I wanted to ask about, I guess the temperature of some of the tribal news that's been out there, obviously a big decision that we learned a few months ago in Florida. Does this change the landscape of other tribal states in terms of what you believe they could offer? And then more importantly, your ability to partner with these companies, could that accelerate some of the TAM if they decide to move forward on digital? Speaker 600:54:13Thanks. Speaker 200:54:14Yes. I do think that there is some momentum in tribal communities now. And obviously DraftKings already has a number of partners that are tribes in various states, including Foxwoods, the Pequot tribe in Connecticut, Pascamutti in Maine, Bay Mills in Michigan, several others. I don't want to leave any out, but I probably left a few out. But we continue to believe that we are a partner of choice and that we have a great track record if you talk to any of our tribal partners of being great partners. Speaker 200:54:50And I think just like anything, it takes time and education sometimes in some states like California where there's over 70 tribes. I think that there it's obviously about getting alignment as much as it is about openness. And so each one each state is a bit unique just like all states in all regards politically and otherwise are unique in their own ways. So we kind of have to look at it that way. But I do think there's some momentum now more than ever. Speaker 200:55:24I think you're seeing we're seeing tribes come to us and ask about what we can do. Minnesota is one that I think is another tribal state that got very close to passing a bill this past session. And I'm hopeful that it gets done next session and that was all about the tribes and the tracks agreeing to a deal. So sometimes it's not even about openness, it's about getting different stakeholders within the state to align. Speaker 600:55:49Thank you. Appreciate it. Operator00:55:51One moment for our next question. Our next question comes from Jeff Pantiel with Stifel. Your line is open. Speaker 1800:55:59Great, thanks. Good morning, guys. Thanks for taking our question. Maybe digging in a bit further into some of the commentary on iCasino player acquisition. Jason, you talked about some sequential uplift to conversion rates from the Golden Nugget platform transition. Speaker 1800:56:12But looking at this more strategically, I guess, has your philosophy on investing towards that, I could see no lead player cohort changed at all now that Golden Nugget is fully integrated? Historically, I believe the strategy has been more to focus on cross sell sports users versus acquiring that higher CAC, higher LPVI casino led player. But just curious if you're thinking here shifted around at all based on the returns that you're seeing with this recent user acquisition upside? Thanks. Speaker 200:56:38Yes, I think so. I mean, I wouldn't really describe it as a philosophical change as much as us continuing with the philosophy of following the data and the analytics and putting our dollars where we feel that where we see the best returns. So naturally, as you noted, when you see an increase in performance on GNOG, then that would mean that more dollars should flow there because it's performing better and therefore should get a higher proportion of our acquisition spend. So we definitely are moving dollars around based on performance and what we're seeing and that's always been consistent with what we've done. But the result as you noted has been some shift towards that iGaming first customer acquisition investment, which I think again, it's all just kind of where do we get the best return, right? Speaker 200:57:24It's not that we think cross sell is inherently a better way of doing it. It was just and still is by the way that that's where we get the bulk of our iGaming customers and that's the most efficient means of doing it. But certainly where we see opportunity to invest directly in acquiring an iGaming first customer, we're also taking advantage of that. Speaker 1800:57:43Great. Thanks very much. Operator00:57:45One moment for our next question. Our next question comes from Lance Vitanza with TD Cowen. Your line is open. Speaker 1700:57:54Thanks guys. First of all, congratulations on the great quarter. I just have one question regarding the surcharge, but it does have 3 parts. Maybe just to focus on Illinois, can you talk about what percentage of the EBITDA loss due to the tax rate increase is the surcharge designed to recapture? I'm just trying to get a sense for the potential upside beyond the $900,000,000 to $1,000,000,000 guide to the extent that the surcharge is successful? Speaker 1700:58:20Obviously, I'm talking about fiscal 2025. Speaker 200:58:23Yes. So the way we calculated it is we set the amount such that we are targeting DraftKings covering 20% of gross revenue and taxes. And so basically the way to think of it is any tax rate that's higher than 20%, we would be paying up to the 20% and then the remainder would be the fee is designed to offset. So in a state like New York where the tax rate is 51%, that's a large number. Obviously, the big question is do we see any deterioration in handle and top line as a result. Speaker 200:59:04But you can do the math and see it would take quite a bit because if you think about 51% versus 20%, that's 60% of the taxes that we're paying in New York. And you can do the math on that from all the public reports, it's a big number. So you need to see a substantial decline in handle to get to a point where you were fully cannibalizing that. And obviously, if we saw that, we would reconsider our plan. But I think there's quite a bit of cushion there. Speaker 1700:59:36Well, and my gut tells me that customer activity would actually be highly inelastic, at least around mid single digit surcharge on winnings. But and I know you haven't done AB testing, but do you have any data that you've seen that would bear this out, I mean, other than just our guts? Speaker 200:59:56Yes. I think you're right, by the way. The best data we have is really from either other industries or from our industry in other parts of the world. There are other places where online gaming companies charge customers more because of the tax regime and countries like Germany or Australia as an example. It's not done exactly in this way, but it's conceptually very similar. Speaker 201:00:21Also, we noted this earlier on the call, but a number of industries from hotels to taxis, all have taxes in various states that get charged to the customer. And people may gripe about it, but I don't really see behavior change because of it. So you're right, it depends on the level. I think in the mid single digits, our belief is that when you compare it to sort of other industries as well as sort of what we got checked, think seems fair and seems reasonable to a customer. It seems like this is a good zone for us, but we'll only find out when we do it. Speaker 201:00:58It's hard. You can't really AB test something like that. Speaker 1701:01:02Right, right. And last part of my question, I'm glad that you're making the surcharge visible to consumers. As you point out, black market operators pay 0 tax, a 40% tax and obviously referring to Illinois here. That seems shortsighted, unfair and ultimately counterproductive. And I'm wondering if part of the calculus in making the visible, making the surcharge visible, is that intended to raise awareness around this issue? Speaker 1701:01:27Do you think you could possibly generate grassroots support for Speaker 201:01:37entered into our thinking. Obviously, you entered into our thinking. Obviously, you're right. When you have illegal operators paying 0 tax, that's pretty tough to compete with at any level. But when it starts getting higher than 20%, it just becomes untenable. Speaker 201:01:55So I do think that in absence of us doing something like this, why wouldn't more states consider it? It's not getting passed to their customers. They're not hearing from their constituents. And we haven't in New York done anything differently or nobody in the industry has. So I do think that this is something that may make some states reconsider because now they may be hearing more from their citizens that they don't like it. Speaker 201:02:21Obviously, they wouldn't be hearing anything if we from people that weren't being charged because it's not like I guess maybe they'd hear from like local teams that aren't getting as much sponsorship spend, but not from the massive voters that bet on sports. So but in the end, I think states are going to decide based on a number of I mean, if you look at some of the comparisons, Steve, I mentioned like taxis and hotels, it's not like you don't pay for that when you go to New York. So I think some states feel like because of where they are and because of the value proposition they bring that they can have higher costs in certain things. And that's not up to us. That's a policy decision that they're going to have to make. Speaker 201:03:03And as a business, we have to make the business decision that we have to make accordingly. But certainly, we will continue to advocate for taxes that allow us to compete more with the illegal market. And I'm hopeful and I believe most states do see that. If you look, most the vast majority of states around the country have tax rates of 20% or under. It's just a handful that don't. Speaker 1701:03:27Thanks, guys. Operator01:03:29Ladies and gentlemen, this concludes the Q and A portion of today's conference. I'd like to turn the call back over to Jason Robbins for any closing remarks. Speaker 201:03:36Well, thank you all for joining us on today's call. We are really optimistic about the second half of twenty twenty four and are excited and well positioned for success in the future 2025 and beyond. Thank you for your continued support. Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.Read morePowered by Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) DraftKings Earnings HeadlinesR Stanton Dodge Sells 105,554 Shares of DraftKings Inc. (NASDAQ:DKNG) StockJuly 24 at 4:04 AM | americanbankingnews.comDraftKings: High-Reward Gaming Bet - Prediction Prospects Appear CompellingJuly 22, 2025 | seekingalpha.comHIDDEN IN THE BOOK OF GENESIS…“This land I will give to you…” — a 4,000-year-old line from Genesis may hold the key to unlocking a $150 trillion vault of untapped American wealth. Former CIA advisor Jim Rickards calls it the “Old Testament Wealth Code” — and says it could transform your financial future. He’s revealing everything in a new presentation. | Paradigm Press (Ad)DraftKings to Release Second Quarter 2025 Results on August 6, 2025 and Host Conference Call on August 7, 2025July 22, 2025 | globenewswire.comDraftKings Makes Royal Debut in Online Sports Betting and iGaming Industry, While Bluesky Receives Highest Social Media Score Ever, ACSI Data ShowJuly 22, 2025 | businesswire.com3 Stocks Soared After This Tool Flagged Them — and Here Are 2 MoreJuly 20, 2025 | investorplace.comSee More DraftKings Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like DraftKings? Sign up for Earnings360's daily newsletter to receive timely earnings updates on DraftKings and other key companies, straight to your email. Email Address About DraftKingsDraftKings (NASDAQ:DKNG) operates as a digital sports entertainment and gaming company in the United States and internationally. It provides online sports betting and casino, daily fantasy sports, media, and other consumer products, as well as retails sportsbooks. The company also engages in the design and development of sports betting and casino gaming software for online and retail sportsbooks, and iGaming operators. In addition, it offers DraftKings marketplace, a digital collectibles ecosystem designed for mainstream accessibility that offers curated NFT drops and supports secondary-market transactions. 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There are 19 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to DraftKings First Quarter 20 24 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that this conference is being recorded. Operator00:00:21I would now like to turn the call over to your speaker today, Alan Ellingson, DraftKings' Chief Financial Officer. Please proceed. Speaker 100:00:29Good morning, everyone, and thank you for joining us today. Certain statements we make during this call may constitute forward looking statements that are subject to risks, uncertainties and other factors as discussed further in our SEC filings that could cause our actual results to differ materially from our historical results or from our forecasts. We assume no responsibility to update forward looking statements other than as required by law. During this call, management will also discuss certain non GAAP financial measures that we believe may be useful in evaluating DraftKings' operating performance. These measures should not be considered in isolation or as a substitute for DraftKings financial results prepared in accordance with GAAP. Speaker 100:01:07Reconciliations of these non GAAP measures to the most directly comparable GAAP measures are available in our earnings release and presentation, which can be found on our website and in our quarterly report on Form 10 Q filed with the SEC. Hosting the call today, we have Jason Robbins, Co Founder and Chief Executive Officer of Draxman's, who will share some opening remarks and an update on the business. Following Jason's remarks, I will provide a review of our financials. We will then open the line to questions. I will now turn the call over to Jason Robbins. Speaker 200:01:38Good morning and thank you all for joining. There are 5 key points that I'd like to focus on during our call today. First, we are achieving strong and efficient customer acquisition. New OSB and iGaming customers increased nearly 80% year over year, while CAC declined more than 40% year over year in the second quarter, a period with no new We anticipate the healthy customer acquisition environment to continue through the back half of the year and possibly beyond, which may indicate that the U. S. Speaker 200:02:07Online gaming opportunity could be even larger than we previously thought. 2nd, we believe we have a reasonable solution for high tax states including Illinois. We plan to implement a gaming tax surcharge in the 4 states that have multiple sports betting operators and tax rates above 20% starting January 1, 2025. We believe additional upside potentially exists for adjusted EBITDA in 2025 and beyond from this gaming tax surcharge. 3rd, the jack pocket integration is off to a great start. Speaker 200:02:38We are on track to hit the multi year guidance for the transaction that we provided in announcement and expect the deal to generate positive adjusted EBITDA in the fiscal year 2025. 4th, we are excited about the future and are reiterating our expectation for $900,000,000 to $1,000,000,000 of adjusted EBITDA in fiscal year 2025. Finally, we said last quarter that we would provide an update on capital allocation. We are pleased to announce that our Board authorized a share repurchase of up to $1,000,000,000 of our Class A common stock. This inaugural authorization reflects our conviction in the strong trajectory of our business and our expectation that we will generate significant free cash flow in the coming years. Speaker 200:03:19I'd also like to emphasize that all of us at DraftKings are very excited for the start of football season. Our product is in a great position as we are continuing to differentiate ourselves by investing in new features and functionality for Sportsbook and iGaming. In Sportsbook, we recently launched in house player prop wagers for NFL, NBA, MLB, NHL, college football, college basketball and tennis. We also broadened our progressive parlays to include spread and total wagers. In addition, we plan to integrate a bet and watch experience with NFL streaming. Speaker 200:03:52In iGaming, the DraftKings and Golden Nugget online gaming apps were ranked number 1 and number 2 overall in a recent third party survey. We are on track to double the number of new games we will release this year compared to last year and recently improved our interface to promote game discoverability. In closing, our business fundamentals are very healthy and we are excited about the second half of twenty twenty four and beyond. With that, I will turn it over to Alan Ellingson. Speaker 100:04:17Thank you, Jason. I'll hit some financial highlights, including our Q2 2024 performance and our updated guidance. Please note that all income statement measures discussed, except for revenue, are on a non GAAP adjusted EBITDA basis. As Jason mentioned, our business fundamentals were strong in the Q2. We generated $1,104,000,000 of revenue, representing 26% year over year growth and $128,000,000 of adjusted EBITDA. Speaker 100:04:43Importantly, customer acquisition exceeded our expectations as new to DraftKings, OSB and iGaming customers increased nearly 80% year over year. Customer retention and engagement were healthy and resulted in a handle that exceeded our expectations. Handle was strong even with fewer than anticipated NBA playoff games. Structural sports percol percent improved year over year in line with our expectations to approximately 10%. Adjusted gross margin for the 2nd quarter was 43%, primarily due to better than expected customer acquisition and the corresponding promotional reinvestment. Speaker 100:05:18Operating expenses, including sales and marketing, products and technology and general and administrative expenses were consistent with our expectations as we continue to balance revenue growth with operating efficiency across the organization. Moving on to our fiscal year 2024 guidance. We now expect revenue in the range of $5,050,000,000 to $5,250,000,000 from a range of $4,800,000,000 to $5,000,000,000 The updated range equates to year over year growth of 38% to 43%. The increase in revenue guidance is driven by strong customer acquisition, engagement and retention trends for our existing customers, as well as the inclusion of Jackpocket in our recent launch of Sportsbook in Washington, D. C. Speaker 100:06:00We are also revising our fiscal year 2024 adjusted EBITDA guidance to $340,000,000 to $420,000,000 from the range of $460,000,000 to $540,000,000 The revision takes into account Illinois raising its sportsbook tax rate, strong new customer acquisition expectations, as well as the prior mentioned inclusion of Jack Pockett in our recent sportsbook launch in Washington, D. C. For fiscal year 2024, we now expect our adjusted gross margin to increase modestly. We expect sales and marketing expense to increase at a mid to high single digit rate year over year. The increase is primarily due to the investments in Jackpocket brand. Speaker 100:06:37We continue to expect the bridge between adjusted EBITDA and free cash flow to be approximately $100,000,000 based on approximately 120,000,000 Speaker 300:06:46dollars of annual Speaker 100:06:47capital expenditure and capitalized software development costs, as well as a modest source of cash from changes in net working capital combined with interest income. And we continue to expect 2024 stock based compensation expense to be flat to down in dollar terms on a year over year basis and represent approximately 7% of revenue in fiscal year 2024. Looking ahead to fiscal year 2025, we continue to expect adjusted EBITDA in the range of $900,000,000 to $1,000,000,000 due to our underlying business momentum, including the benefit of higher customer acquisitions in the second half of twenty twenty four. We believe additional upside potential exists when we apply the gaming tax surcharge in those noted high tax states that have multiple online sportsbook operators, which we are not including at this time. We expect to provide more details on our fiscal year 2025 guidance with our next earnings report in November. Speaker 100:07:35That concludes our remarks. We will now open the line for questions. Operator00:07:39Thank you. Our first question comes from David Katz with Jefferies. Your line is open. Speaker 400:08:02Thank you and good morning. I appreciate all the information. What I was really hoping to do was just talk about the surcharge for a moment, which is an interesting strategy and how you thought about the degree to which competitors may or may not follow and how you react under those circumstances? Just fleshing out the strategy a bit more would be really helpful. Speaker 200:08:35Thank you, David. Great question. I think every company has to do what's best for their own business. I think we believe this is what's best for us. And I would imagine that if that's our calculus, then others would come to the same conclusion, but we really don't know and we'll have to see. Speaker 200:08:54And obviously, there might be other ways too that other ideas for how to implement something like this that might be better than what we came up with. We thought through this quite a bit, but you never know. So, we do have some time between now and Jan 1st and we'll see what happens. Speaker 400:09:14Right. Interesting. And as a quick follow-up, just with respect to putting the surcharge aside, if we think about the impact that we should be reflecting in our models for Illinois, assuming no surcharge, any help, Alan, as to how we might sort of think through that impact and include it for the future? Just a lot going on in there. Speaker 200:09:44I'll answer quickly and then Alan can add any detail. But I think the best way to think about it is the over performance that we are seeing with customer acquisition, the launch of Washington, D. C, our expectation for Jackpocket to deliver positive EBITDA next year as well as underlying trends with our existing customers outperformance on the handle side all should offset the Illinois tax increase next year. So even if we don't get any benefit from the fee, we will see still $900,000,000 to $1,000,000,000 in adjusted EBITDA next year. Speaker 400:10:22Okay. Okay. Thank you very much. Operator00:10:25One moment for our next question. Our next question comes from Shaun Kelley with BofA. Your line is open. Speaker 500:10:34Hi, good morning everyone. Jason or Alan, I think a lot of the rest of the subject of the sort of update here is about the increased customer acquisition environment, obviously some of the continued investments you're making. So the impact here seems to be the net is obviously higher revenue expectations and lower profit flow throughs. Specifically asking about kind of 2025 to start, just the implied guidance right now some reacceleration. You haven't I don't think you've given explicit revenue guidance. Speaker 500:11:07That seems to be kind of the undertone here. So what in your mind would kind of cause the environment to change from where we're at today? And if it doesn't, what would some of the offsets potentially be for DraftKings as we kind of move into next year? And let's say, the customer acquisition environment remains rich and you continue to see strong adds there? Thanks. Speaker 200:11:27Yes. It's a great question. Just to explain a little bit about what's going on. 1, even if we didn't spend another dime of marketing, new customers get new promotions. So you're right that adds a drag on revenue and EBITDA. Speaker 200:11:42And we're seeing enough outperformance on the revenue side elsewhere that while it certainly hit the bottom line a little bit or will for the remainder of the year, it didn't actually we're still seeing improved revenue. So that just kind of demonstrates I think the underlying strength of the business and the customers that we're seeing. So when you kind of put all that together next year, we do expect to get a little bit more revenue because we'll need that to offset in order to make the math work that's needed to offset the Illinois gaming tax increase. So that's kind of how you get to the $900,000,000 to $1,000,000,000 And then any And then as far as the potential for a hot customer acquisition next year, And then as far as the potential for a hot customer acquisition next year, that can always happen. Right now, we feel we've built in some degree of the increased trends we're seeing. Speaker 200:12:40And obviously, a lot of that will depend on if there's more state launches and things like that. So, I think you could sort of think of this as a same state basis type of thing again. And obviously, if there's more state launches next year and more customer acquisition investment, then that might change things a bit. But that just means bigger numbers longer term over the following years. So I think that's the right way to think about it. Speaker 200:13:03But as of today, I see no reason to think that on a same state basis, we wouldn't be able to deliver $900,000,000 to $1,000,000,000 in EBITDA in adjusted EBITDA next year. Speaker 500:13:12Thank you. Operator00:13:14One moment for our next question. Our next question comes from Our next question Speaker 300:13:21comes from Stephen Grambling with Morgan Stanley. Your line is open. Hi, thanks. Just want to maybe follow-up on Sean's question, but ask in a different way. Are you seeing any change in the cost to sustain and engage existing players? Speaker 300:13:31And also on the new customer acquisition, is that primarily coming from new states? Are you still seeing even greater uptick from existing states? Speaker 200:13:40So we are not seeing an increase in the existing player cost. It's all new player driven and mix driven, so meaning mix of new players to existing. And interestingly, it really is across the board. So certainly, we got some boost from North Carolina having launched in late Q1. But if you remember last year, we had 2 big states, Ohio and Massachusetts launch in Q1. Speaker 200:14:04So this year there were less new state launches around this time frame and none in Q2. We did have DC launch recently, but that didn't affect the Q2 numbers that was in July. So really it has to come from existing states if you look at it that way. And then it's really across products too. We did see some particular strength in the Golden Nugget brand as we migrated on to the DraftKings platform and product. Speaker 200:14:28We definitely saw a boost in conversion and got some lift on there. But really it's been across states, across products. Speaker 600:14:37Thank you. Operator00:14:38One moment for our next question. Our next question comes from Joe Greff with JPMorgan. Your line is open. Speaker 700:14:48Good morning, everybody. Jason, just wanted to ask on the higher new user acquisition cost plans in the second half of this year. How much of this is offense, meaning to grow the new user base versus defense versus impacting the competition? And then my follow-up to that is, you mentioned that presently the customer acquisition environment is healthy. What if that environment changes to the downside? Speaker 700:15:17How do you react? How do you pivot? Speaker 200:15:20Yes, great questions. I mean, we I think have been very consistent in that we don't react competitively. We make decisions based on our 3 year payback rule and what our data says our customer acquisition spend is returning. So as we noted, we had an over 80% increase and almost, excuse me, 80% increase in new players in Q2 year over year and an over 40% CAC decline. I mean, those are just massive numbers, right? Speaker 200:15:46So when you're me looking at those numbers and your marketing team is coming to you and saying we can deliver more productive spend with the same type of results, It's hard to say no to that, right? And we've been monitoring cohort quality closely. I mean everything looks really, really solid. So I think it's just a particularly strong environment right now. The market is growing quickly. Speaker 200:16:08I think it's just really you got to fish when the fish are biting, so to speak. So I think that's the way to think about it. It's absolutely offensive and really more so just kind of following the data. And by the same token to your second question, if it goes the other way, we'll follow it back the other way. So the good news for us is the vast majority of our marketing spend is flexible. Speaker 200:16:31We can move in and out of it very quickly. A lot of it's digital. Even the TV, we can move out of it in a matter of days usually. So really it's quite easy for us to make adjustments as we see what's working and at what levels. And same way that when the data is telling us we should be investing deeper because the paybacks are really strong. Speaker 200:16:49If we start to see the opposite or if we start to see a decline in cohort quality, we can easily adjust there. Speaker 700:16:56Great. And Alan, once you start becoming a cash taxpayer with the gaming, what's the corporate tax, cash corporate tax rate in 2026? Speaker 800:17:05We'll probably start paying a minimum amount of cash taxes in 2025 and 26, but we don't expect to run through all of our NOLs until 27 or 28 at the soonest. Speaker 200:17:16Thanks, Ed. Operator00:17:18One moment for our next question. Our next question comes from Clark Lampkin with BTIG. Your line is open. Speaker 900:17:27Good morning, everyone. Thanks for taking the question. Jason, I want to come back to the sort of customer acquisition topic and the comments you made around existing state performance. I'm curious, I guess, in essence of obvious changes, I guess, from last quarter to this one, from like a launch dynamic standpoint, what's creating, I guess, the sort of more favorable environment that you're leaning into? Is it sort of more of a push factor where cats have come down enough where it makes sense to spend more and you can actually reach customer cohorts that you weren't previously addressing? Speaker 900:18:01Or is something sort of ticked up in terms of interest that suggests that TAM maybe really is expanding at a faster pace than we expected right now? Speaker 200:18:11Yes, it's a great question and hard to exactly pinpoint, I think it's a combination of both the things that you said primarily. So one, as we've increased our state footprint, we've talked about this for years now, how this is kind of the gift that keeps on giving. We see the same cost from a national marketing perspective, regardless of how many states we're operating in. But the bigger your footprint, the more bang for your buck you're getting for it. So as we've grown our state footprint, you're absolutely right. Speaker 200:18:39It just continues to improve our efficiency, which allows us to unlock the ability to reach a little bit deeper and spend a little bit more in pockets that weren't meeting our payback thresholds previously. Secondly, I do think that there's just a ton of momentum in the industry right now. Lots of buzz coming up with NFL season. It's only going to get bigger because this is the most busy time of year for us typically from a customer acquisition perspective, I guess the Super Bowl, but the whole NFL kind of NBA, that whole fall timeframe is usually the biggest overall period. And really I see no reason to think that that's going to slow down. Speaker 200:19:16Obviously, as noted earlier, we're going to be very closely monitoring the data. And if we see any changes, we'll adjust our spend and adjust our approach. But right now, I think if anything, you'd expect it to build because we're in really the least busy time of year, and we're still seeing very strong customer acquisitions. So I don't know why that would slow down going into the busiest time of year. Speaker 900:19:37Understood. I have a follow-up also for Alan, I guess, on the repurchase that was announced today. Alan, you guys just wrote a fairly large check for Jackpocket. There have been some rumors of other sort of smaller scale deals. Football season last year was a pretty good reminder of result swings and the potential for sort of intra quarter outflows. Speaker 900:19:58Is it fair to think that I guess utilization of that buyback authorization might be more of a 20 5 event? And if so, is this something that's going to be more formulaic in nature? Or would you hope to be a little bit more tactical and take advantage of bigger dislocations, I guess, in the stock price? Thank you. Speaker 800:20:18I think we anticipate being able to buy back the $1,000,000,000 of Class A shares over the next 2 to 3 years. We would like to be ideally be formulaic with it, create some consistency, but I do expect it to take more than just the next little while to get fully finalized. Yes. Speaker 200:20:38And it will be a mix. I mean, we'll have certainly some flexibility as you noted to take advantage of any dislocations in the share price. But as Alan noted, I think the bulk of it will be formulaic. Speaker 900:20:54Thank you. Operator00:20:55One moment for our next question. Our next question comes from Robert Fishman with MoffettNathanson. Your line is open. Speaker 1000:21:04Hi, good morning. Curious, are you guys seeing any signs of consumer weakness in your some of your older states maybe? And how would you think about the impact on OSB and iGaming if we see any more macro headwinds in the next couple of quarters? And then shifting gears a little bit, given the expected integration of the Bet and Wash experience with the NFL streaming, curious, did you see anything last year, some of your competitors did, I think, have this functionality. So anything that you learned last year about the NFL season that pushed you into this product enhancement? Speaker 1000:21:40And any early thoughts about exploring these rights for the NBA? Thank you. Speaker 200:21:47Yes. I think on your first question, we're seeing absolutely no signs of any weakness in the consumer whatsoever. Hard to know how much of that is unique to our industry versus macro. But really on our end, we're seeing super strong healthy cohort behavior across the board. And as noted, customer acquisition is really at an all time high as well. Speaker 200:22:09So everything looks really good on that front for us. On the Bet and Watch side, it wasn't really that we saw anything last year and anything our competitors did. It was more that we wanted to do this all along. It's a great thing that we think will add a lot of value to our customers doing live betting, just didn't make the cut. We had so many other great things that we were trying to get done last year. Speaker 200:22:30And I think to do it in a sort of haphazard way wasn't our style. We want to do it right. So we really want to make sure it wasn't just some kind of hacked together integration of a video feed, but it was a true experience that we are creating because if somebody tries it, we want them to say is great and come back and you only get one shot at a first impression. So I think we felt like between the other things that we had on our roadmap and our desire to make sure we did this in the right way, we decided it would be better off for this coming season. Operator00:23:03Thank you. One moment for our next question. Our next question comes from Ben Miller with Goldman Sachs. Your line is open. Speaker 1100:23:12Thanks for taking the questions. I guess just back on the gaming tax surcharge, can you just talk about the thought process behind using a surcharge as the mitigation measure as opposed to a more discrete lever? And then are there any insights you can share around customer behavior from any AB testing that you might have done in advance of announcing this? Thanks. Speaker 200:23:36Sure. So definitely discussed and thought there are a lot of different ways of doing it. And as I said, some better idea comes we're open to it. I think the important thing is that, if you look at sort of the way it's typically done in other industries, whether it be hotel taxes or even the sales tax that you pay when you buy something at the store, taxis, you name it. It's typically line itemed out separately and usually 100% passed along to the consumer. Speaker 200:24:08In this case, we're obviously subsidizing a chunk of it. So we just thought that was most sort of in line with how it's typically done versus trying to obfuscate it, which also isn't consistent with our commitment to be transparent to our customers and be very customer friendly in everything we do. So, I know there's maybe benefit to hiding it because maybe people don't notice. But I think over the long term, customers appreciate transparency. And even if they don't love their state implemented a high tax and some of that is being passed along. Speaker 200:24:40I think they prefer that to not knowing if it were buried in the pricing or something else. Speaker 1100:24:48Was there any AB testing that you guys done that you could share any customer behavior from that? Speaker 200:24:55No, we haven't. We actually still there's work to do to implement it. And I think it's hard to AB test something like that. What we are doing is we're launching in 4 states. So we'll certainly see the impact there. Speaker 200:25:09And obviously, it won't be a perfect AB test, but I think that we have enough comparable data from other states and enough of an understanding of what we would expect from consumer behavior that I think we'll have a pretty clean read on the impact. But it is a nominal amount. If you look at the materials we provided in the investor presentation, for Illinois, for example, if you need a $10 bet to win $20 it would be a $0.37 ish $0.30 something, I forget the exact number charged. So obviously some people might just react negatively to the idea of being charged at all, but it's really fairly nominal And it makes a huge difference in our ability to make a reasonable margin and also more importantly to compete with the illegal market, which pays no taxes and has the ability to invest 100 percent of their revenue into product and other things. So for us to be able to be competitive with the illegal market and invest properly in product and customer experience in a state that has a very high tax rate, we feel is an important step that consumers will ultimately understand. Speaker 200:26:13And if they feel the product and experience is better, then they'd rather pay for that than somewhere else that maybe doesn't have as strong a product. Speaker 1100:26:21Great. Thanks so much. Operator00:26:23One moment for our next question. Our next question comes from Robin Farley with UBS. Your line is open. Speaker 1200:26:31Thanks. Yes, I wanted to ask when you think about strategy in Latin America, is that something you would pursue sort of organically or something that you might look to use M and A to get a stake in that market? And then just a quick follow-up question on the earlier commentary about the increased acquisition, customer acquisition. Your market share looked pretty consistent year over year. I guess, how should we think about what's the time lag between the higher customer acquisition and that showing up in the market share numbers? Speaker 1200:27:05Thank you. Speaker 200:27:07So a couple of things. One, answer your question on Latin America. We would probably not do it organically if we were to pursue. It would be through M and A. That said, we don't currently have any plans to do that either. Speaker 200:27:21I think we're really focused as we've noted in the past on winning the U. S. Online gaming opportunity. In fact, just in the last couple of months, we divested Viesen, we shuttered Rainmakers. So I mean, we're more focused than ever on our core. Speaker 200:27:36And I think that's just been a mantra and a theme throughout the company is focus, focus, focus. So definitely want to make that point. But were we to do something, I think it would likely be through M and A for that very reason. We don't want to take a big chunk of our brain trust here and distract them with something like that. And then, I'm sorry, second question on share. Speaker 200:27:57So hard to know exactly, because I would assume that if we're seeing robust customer acquisition then our competitors are as well. So I don't know if that's unique to us. If it were unique to us, it should show up pretty quickly within a quarter or 2 of acquiring the customers. But I think the caveat is my guess is that the entire market, the entire industry is experiencing very strong customer acquisition right now because, well, I guess there could be some things like in the case of the Golden Nugget migration that we're getting a little bit of an extra boost from. But for the most part, we're seeing it across states, across products. Speaker 200:28:33So I think it's more of a macro industry trend as much as anything else. Speaker 1200:28:38Okay, great. Thank you very much. Operator00:28:40One moment for our next question. Our next question comes from Dan Politzer with Wells Fargo. Your line is open. Speaker 200:28:47Hey, good morning, everyone. First one, in terms of that stronger customer acquisition, retention and engagement, if I just look at your slide deck, it's a positive revenue of about $177,000,000 but a drag in terms of EBITDA. That compares with your Q1 where both of those figures were positive, right? They would add incremental adjusted EBITDA. So I guess the question is, is there any way to kind of break out this the $23,000,000 EBITDA loss or as part of your bridge as it relates to better monetization of existing customers versus maybe the drag of acquiring new customers? Speaker 200:29:24Yes. It's a great question. I mean, I think that the best way to think about it is if you assume that the incremental revenue from existing customers flows through somewhere in the 50 ish percent range, maybe a little bit higher, but somewhere around there, then you can kind of back into what comes from each. Got it. And then just from the call. Speaker 200:29:46And the other thing I'd note too, and I just want to make sure people understand this as well because I think it's an important point. When we talk about revising EBITDA guidance and incremental customer acquisition cost, Even if we didn't spend any more money on marketing, new customer promos come from just more customers coming in. So if we under forecasted, which in this case we did, the number of new customers that we expect to acquire this year, then even if we spent 0 more dollars on advertising on marketing, we would still see a headwind, which is in that line, you're mentioning from new customer promos because just more people signing up means more new customer promos. So that's a good thing. It's not a bad thing. Speaker 200:30:32Obviously, it creates more profit over the long term. But it's something that really is not within our control. And I think a good long term element of what we believe is a large and growing TAM. But in the end, unless we took away new customer offers, which we would never do, that's something that we can't really control. Got it. Speaker 200:30:55And then just quickly for my follow-up on the surcharge. In those states that you're going to implement that, are there additional steps that you're going to implement as well, such as marketing reductions or any other levers you can pull in Illinois, New York, Pennsylvania to maybe offset some of the higher taxes? Yes. I think part of the idea is to do this in place of that, so we can continue to invest in the state. I think New York is a great example where everyone all companies have including DraftKings have pulled back heavily on promotions and in state marketing investment. Speaker 200:31:32And I think that's fine. That's one way of doing it. But another way is to say, look, I'm going to adjust so that we're effectively at a 20% tax rate, which is in line with a lot of other states and I'm going to invest at the level that I would invest in a 20% tax rate state. We'll have to see which one works better, but my guess is that that's going to work better because it allows us to make the investments in product and promotions and marketing and all the other things that should continue to create long term growth. Thanks so much for all the detail. Operator00:32:09One moment for our next question. Our next question comes from Joe Stauff with SIG. Your line is open. Speaker 1300:32:16Okay. Thanks. Good morning, Jason and Alan. Two questions, please. I wanted to see if you could, Jason, sort of describe, say, the iCasino first opportunity at this point. Speaker 1300:32:28You have GNOG fully ramped out and launched. And in particular, was it a material contributor to your MUP growth? And then the second piece is, just wanted to ask about, say, the economics of customer acquisition in existing states. We're aware obviously of that initial golden cohort, but just wondering how and what you've seen in terms of the economics and the LTVs for all the cohorts after that, whether it be year 2 versus year 3 and so forth. I guess the main question is like in year 2 year 3 based on what you can observe, are the economics very different between them? Speaker 1300:33:17One would think over time it'd be lower, but I was just wondering what you're observing. Speaker 200:33:23Yes. It's a great question. So starting off, as we noted, we're seeing customer acquisition outperform really across the board really states and products alike. That said, GNOG has been a bright spot ever since we migrated onto the DraftKings products and platform, which is a much more positive customer experience, better conversion flows, all those sorts of things, we have definitely seen GNOG spike. So that was a material contributor for sure. Speaker 200:33:53It's still relatively small compared to DraftKings, but we're very excited about the potential for that brand and the growth that we're going to see there. So more to come there, but definitely an important contributor to the outperformance on customer acquisition. And then the cohort question, we've noted this in the past as well. For sure, as time goes on, you see some decline in cohort quality. It's a thing that we look at every single day and it's not just a matter of time. Speaker 200:34:23Obviously, time is one factor, but you also see different LTVs based on what sport you acquire a player on or whether a player gets acquired onto iGaming versus onto OSB 1st. There's a number of different factors that we have noted that definitely drive differential LTVs. Obviously, the state that they're acquired and play in based on tax rates and other elements like whether there's iGaming. So lots of complex variables that go into how we look at LTV. But certainly one of them is that there is an underlying quality of the player that declines as time goes on because of course you're going to get your strongest players in the 1st year or 2 of a state launch. Speaker 200:35:01So that is something that we factor in. We closely monitor it. It tends to asymptote out after a little bit of time. So it's not like it just perpetually declines. Usually you kind of get that 1st year or 2 depending on the state, where you get the strongest players and then it kind of flattens out. Speaker 200:35:16But, no doubt, players are getting a few years in are weaker than the players you get day 1. Thank you. Operator00:35:24One moment for our next question. Our next question comes from Carlo Santarelli with DB. Your line is open. Speaker 1400:35:35Hey, everybody. Good morning. Speaker 200:35:38Good morning. Speaker 1400:35:38First off, I just wanted to clarify something as it pertains to the 80%. The 80% growth in customers, does that include the draft the Jackpocket customer base? Speaker 200:35:54No. That's just new customers onto the DraftKings brand. Oh, and Gene Aug as well. Speaker 1400:36:00In GeneHogg and Draft. Okay. That's helpful. And then secondly, just to follow-up, Jason, on your response to, I believe it was Dan's question around the $177,000,000 of net revenue and the $20,000,000 I know you said 50% flow through on the existing customers. Is it fair to more or less estimate that the existing customers are likely generating, call it, more than $177,000,000 of incremental net revenue as the new customers would carry kind of negative net revenue through the rest of this year through the payback period and hence the math is kind of like 200 to 300 from new customers and then looked at the other way, you take 50% flow through for the EBITDA and look at what the delta is on the acquired customers. Speaker 1400:36:56Is that accurate? Speaker 200:36:58That's close. So new customers that we acquired say in Q2 will definitely generate positive revenue by the end of the year. But their new customer promo will also be a significant chunk of the play. It's what is it about 3 or 4 months after customers acquired that they so depending on the timing, many of them will be negative this year, but some would get positive. So it's a little bit complicated to think about. Speaker 200:37:28But the best way that I would think about it is separate out instead of thinking of it at the customer level, think of it as we're spending X more promo dollars because of new customers. And those promo dollars are going to flow through somewhere around 90% to the bottom line. And that's how you can back and then the rest of the revenue, the positive revenue flows through in the 50s and that's how you can back into it. Speaker 100:37:55Got it. Speaker 1400:37:55Okay. That makes sense. Thank you. Operator00:37:58One moment for our next question. Our next question comes from Bernie MacDrayan with Needham and Company. Your line is open. Speaker 300:38:07Great. Good morning. Thanks for taking the questions. Maybe just to start sticking on the EBITDA bridge for 'twenty five or moving over to 'twenty five. How much of the stronger customer acquisition retention engagement that line that's offsetting the Illinois, how much of that is really truly existing customers versus customers that you've acquired this year? Speaker 600:38:29Sorry, say it one more time. Speaker 300:38:31Yes. In the EBITDA bridge, so Illinois is a big negative and then the big offset is the customer retention engagement line. So I want to know how much of that is driven by truly existing customers that you acquired before this year and better outperformance there versus the customers that you have been and expect to acquire this year? Speaker 200:38:55This is 2025, right? Yes. Speaker 300:38:58For the 2. Exactly. Speaker 200:38:59Okay. I don't know proportionally how it breaks out. Do you know the answer to that? Speaker 800:39:07We won't break it out for this call, but disproportionate amount of it is the existing customers. New customers tend to ramp up over time. So you can assume that it's a little bit heavier on the existing customers and the performance on the retention and the engagement of our existing customers and less on the new customers, which we're still exploring the value of. Speaker 300:39:27Okay, perfect. And then, just given the focus on higher tax rate states, is the contribution profit margin significantly different in those high tax rate states versus the lower ones? Speaker 200:39:44Well, pre instituting the fee, definitely the contribution margin is different because even with reduced promo and marketing, you still can't like I mean it depends on the state, right? I guess New York is probably the one I'm thinking of when I'm answering your question. 51% tax on gross revenue is just you can't overcome it to a point where it's going to be in line with the other states margin wise. But obviously, it depends on the state. In some states that are closer to that 20%, we can call back most of it through promo and reduced advertising. Speaker 300:40:23Okay. Thanks, Jason. Thanks, Alan. Operator00:40:26One moment for our next question. Our next question comes from Jed Kelly with Oppenheimer. Your line is open. Speaker 1500:40:35Hey, great. Thanks for taking my question. Just circling back on the surcharge, maybe a different way to ask it. What would cause you not to potentially implement it? And then just real quickly on hold, some of the hold trends are obviously different, But have you seen any change in how you view your structural hold or your parlay mix or are you changing like, hey, it's more important to drive engagement than to maximize hold? Speaker 1500:41:05Thanks. Speaker 200:41:07Yes, great question. So as of now, I don't think there would be any reason that we wouldn't implement it. But obviously, we're paying close attention to customer feedback. And if we hear anything that makes us change our mind, we'll certainly let you know. I think on the hold side, we continue to focus very much there. Speaker 200:41:26I think it's largely still a bet mix thing. Certainly, we feel like there's a ton of room to increase our parlay mix and increase our average leg count still. So team is very focused on that. I think we're also focusing on other parts of the bedding platform as well such as live betting. So, it's a little bit more balanced probably than I think maybe last year where it was just all about whole rate and bet mix, but we're still very focused on bet mix. Speaker 1500:41:56And then just real quick, anything to call out on shutting down Rainmakers in terms of EBITDA drag or headwind? Thanks. Speaker 200:42:05Yes. Rainmakers is fairly immaterial. So I wouldn't factor it in, in any way. I think for us, it's really just about eliminating a distraction and potential risk. And as I said earlier, I think the mantra around the company has been focus, focus, focus. Speaker 200:42:21Let's go win the U. S. Online gaming opportunity and maximize the amount of profit we're driving in that space. And I think that's what we're focusing on right now. Speaker 600:42:30Thank you. Operator00:42:43Our next question comes from Barry Jonas with Sherwood Securities. Your line is open. Speaker 900:42:48Hey, guys. We've seen a number of states starting to react to the offshore market by banning the VIBADA. Do you see these actions as meaningful to combat the illegal market? Speaker 200:42:59I think so. I mean, right now the illegal market, particularly in the iGaming space ironically is bigger than ever. I think consumers don't know oftentimes what's legal and what's not. They don't know if it's legal in their state. And there's just 0 controls put on these companies that make sure that they're not marketing to minors and other sorts of things. Speaker 200:43:24So I do think it's a big issue and it's good to see the regulators starting to focus on it. And the thing is that there's so much pent up demand and there's so many people that would prefer to bet in the legal market that I think you're seeing growth despite the fact that there's still a ramp into legal market. But for sure, a lot of the current TAM is still tied up there and both for the long term health of the industry as well as for making sure that states are maximizing their revenues and their purpose for doing this, which is to regulate and protect consumers. I think it's absolutely essential that that continues to be a focus. So I'm happy to see it and hopefully we'll see more of it. Speaker 200:44:06Great. Thank you. Operator00:44:07One moment for our next question. Next question comes from Ben Chikane with Mizuho. Your line is open. Speaker 1500:44:18Hey, thanks for taking the question. 2 very quick product questions. I guess on integrating I would imagine integrating Zap Pocket into the DraftKings app would be another significant customer acquisition opportunity. I guess, 1, do you agree? And 2, if so, any color on timing? Speaker 1500:44:34And then on the Bet and Watch integration, will that require users to have access to the games themselves? Or will you have an opportunity to kind of tactically subsidize that anyway? Thanks. Speaker 200:44:44I think the bet and watch is just included. So is that correct? It's not yes, there's no additional charge for it. So it's a feature that customers will have just by being a part of the DraftKings user base. And then sorry, what was the first question? Speaker 200:44:59Jackpocket, yes. So we do plan on integrating those products into DraftKings as well as integrating DraftKings Casino and OSB products into Jackpocket. Timing, we haven't quite determined yet. I think in the past what we said and I kind of echo is, we long term to have all of our products available through all of our brands. And exactly when we implement those things directly versus when we have more linkage through brand to brand cross sell will depend on other priorities and how that slots into our product roadmap, but we definitely do plan to do that at some point. Speaker 1500:45:38I guess just as a very quick follow-up, would you agree that integrating it would be a significant kind of customer acquisition, catalyst for other portions of the business? Or do you think you've already acquired those customers, if that makes sense? Speaker 200:45:50No, we definitely haven't acquired all those customers. So I agree it would be and that's the reason we're planning to do it. I also think that in the interim, we continue to see Jackpocket as a great vehicle for acquiring those customers and cross selling them into DraftKings. But we know from experience that having a fully integrated product is always going to yield stronger conversion and stronger cross sell. So no doubt you're correct that that will be a boost. Operator00:46:17Thanks. One moment for our next question. Our next question comes from Brent Montour with Barclays. Your line is open. Speaker 1600:46:27Hi, good morning everybody. Thanks for taking my question. So one more on the surcharge. Just thinking through the potential outcomes of that plan, especially if nobody follows suit. We would think that would affect the larger players, the VIPs more. Speaker 1600:46:47And at the same time, you're accelerating your customer acquisition and penetrating more customers in your existing states. Is there a thought that this would potentially move you more to a recreational mix? And could that actually help hold longer term? Speaker 200:47:05Yes. It's a great question. Certainly, I think that players betting multi leg parlays and things like that are going to be less sensitive because the payout is already very large. So I get that. I hadn't really thought about how it might affect I mean, we're hopeful that our product and the investment we're making in our customer experience is strong enough that we get players across the spectrum and they view us as being worth maybe paying a few extra cents on a bet. Speaker 200:47:33But certainly, we'll have to see how that plays out. And it'll be something just like everything where we look at the data and we decide what we do accordingly. I do think that if you run the math, it would take quite a bit of top line deterioration to make it not worthwhile from a bottom line perspective. So I'm optimistic, but we'll have to see and we'll have to follow whatever the data and analytics tell us to do. Speaker 1700:47:58Great. Thanks for that, Jason. And then Speaker 1600:47:59just a follow-up on Jackpocket, just piecing together some of your comments, you're investing more in marketing this year in Jackpocket. The integration sounds like a little bit more longer term. So what gives you confidence that you're going to inflect positive in your 2025 guide in your in that you laid out in your deck? I'm just trying to understand some of the drivers there. Speaker 200:48:24Well, really it's the revenue growth we're seeing right now on Jackpocket that gives us confidence we'll be able to achieve adjusted positive EBITDA in 2025. So, they've been really doing well from that standpoint. Also as a reminder, they have an extremely low CAC. So, while we are investing more in, we get a lot of customers for that. So definitely makes a big difference in their revenue ramp as well. Speaker 200:48:53So I think all signs point towards them being a positive contributor to adjusted EBITDA in 2025 and beyond. But obviously, we'll have to see how the back half of the year plays out and we'll have more of an update on that in November. Speaker 1700:49:05Great. Thanks everyone. Operator00:49:07One moment for our next question. Our next question comes from Jason Bender with Citizens JMP. Your line is open. Speaker 1500:49:17Hey, Storn. Thanks for taking my questions. I want to talk on your market access agreements. There's obviously not much room to move in some states like in New York and Oregon, but has the supply demand dynamic changed to the point that states with unused skins can maybe act as a renegotiation tool and be a serious lever to drive cost savings over the long term? Thank you. Speaker 200:49:45I think there's probably some room there. Most states we feel we have pretty good deals in already. So, I don't think there's ton where we feel there's a lot of optimization, but I think there's probably some optimization. And it'll be a little bit longer term because most of the deals we struck are very long term deals. So like 7 to 10 year deals. Speaker 200:50:10But I do think as they start to come up, there will be states that have a lot of open skins. And just like anything, it's a supply demand thing. And I think also even though we got great rates, many of the early states were before I think we really established the level of place in the industry that we have. So I think that will hopefully help a little bit too. Speaker 1800:50:35Thank you very much. Operator00:50:37One moment for our next question. Our next question comes from Ryan Sigdahl with Craig Hallum Capital Group. Your line is open. Speaker 600:50:47Hey, good morning guys. Looking at Slide 10, the MUP increased sequentially, normally kind of flattish quarter given seasonality, up almost $1,000,000 Are you able to break out how much of that was Jackpocket versus just organic DraftKings and Golden Nugget acquisition? Speaker 200:51:05It was mostly Jackpocket. Obviously, the new customer acquisition boosted it too, but given the substantial size of their database, it was mostly jackpot. No? No. Oh, I'm sorry. Speaker 200:51:18It was not. I got that wrong. Half and half. Okay. I stand corrected. Speaker 200:51:23Thankfully, I have people with better data than I have in my brain apparently next to me. So it's about half and half. Speaker 600:51:30Thank you. Good luck, guys. Operator00:51:32One moment for our next question. Our next question comes from Michael Graham with Canaccord. Your line is open. Speaker 1400:51:41Thank you. Jason, I just wanted to ask about your thoughts on the product and the platform as we head into the NFL season. Obviously, you don't have the tremendous like upside from introducing same game parlays that you had, but you have the bed and watch feature. But just wanted to kind of hear any comments you're willing to share on how you think the product will perform in this important seasonal period here coming up? Speaker 200:52:07I think, I feel really excited about the product we have going into NFL. A lot of the work we've been doing over the last several months has been more back end performance stuff. So things that maybe aren't as immediately obvious because they don't show up like front end features, but things like making sure that pages load faster, making sure that the app crashes less, making sure markets are up for longer and we have less time where markets are locked or unavailable, adding new bet types, bringing in house our pricing and trading for many new sports and also launching things like cash out for same game parlay. So we have a lot of really exciting new stuff. We expanded progressive parlays to include new types of bets as well. Speaker 200:52:51So and more to come. Obviously, Bet and Watch hasn't launched yet and we have a number of other features that we haven't announced that we have planned for the coming months. A lot of what we do, really all of what we do revolves around a calendar starting in the fall. So the team thinks about it as what do we want to ship in the August September timeframe and how do we then starting at the beginning of the year orient our entire product road map and calendar around that. So a lot of the product that we ship is going to be done over the next 3 to 6 weeks. Speaker 200:53:24And I think you'll see a lot of new stuff pop up as season approaches. Speaker 300:53:29All right. Speaker 1400:53:29That's exciting. Thank you. Operator00:53:31One moment for our next question. Our next question comes from Chad Beynon with Macquarie. Your line is open. Speaker 600:53:40Good morning. Thanks for taking my question. Jason, I wanted to ask about, I guess the temperature of some of the tribal news that's been out there, obviously a big decision that we learned a few months ago in Florida. Does this change the landscape of other tribal states in terms of what you believe they could offer? And then more importantly, your ability to partner with these companies, could that accelerate some of the TAM if they decide to move forward on digital? Speaker 600:54:13Thanks. Speaker 200:54:14Yes. I do think that there is some momentum in tribal communities now. And obviously DraftKings already has a number of partners that are tribes in various states, including Foxwoods, the Pequot tribe in Connecticut, Pascamutti in Maine, Bay Mills in Michigan, several others. I don't want to leave any out, but I probably left a few out. But we continue to believe that we are a partner of choice and that we have a great track record if you talk to any of our tribal partners of being great partners. Speaker 200:54:50And I think just like anything, it takes time and education sometimes in some states like California where there's over 70 tribes. I think that there it's obviously about getting alignment as much as it is about openness. And so each one each state is a bit unique just like all states in all regards politically and otherwise are unique in their own ways. So we kind of have to look at it that way. But I do think there's some momentum now more than ever. Speaker 200:55:24I think you're seeing we're seeing tribes come to us and ask about what we can do. Minnesota is one that I think is another tribal state that got very close to passing a bill this past session. And I'm hopeful that it gets done next session and that was all about the tribes and the tracks agreeing to a deal. So sometimes it's not even about openness, it's about getting different stakeholders within the state to align. Speaker 600:55:49Thank you. Appreciate it. Operator00:55:51One moment for our next question. Our next question comes from Jeff Pantiel with Stifel. Your line is open. Speaker 1800:55:59Great, thanks. Good morning, guys. Thanks for taking our question. Maybe digging in a bit further into some of the commentary on iCasino player acquisition. Jason, you talked about some sequential uplift to conversion rates from the Golden Nugget platform transition. Speaker 1800:56:12But looking at this more strategically, I guess, has your philosophy on investing towards that, I could see no lead player cohort changed at all now that Golden Nugget is fully integrated? Historically, I believe the strategy has been more to focus on cross sell sports users versus acquiring that higher CAC, higher LPVI casino led player. But just curious if you're thinking here shifted around at all based on the returns that you're seeing with this recent user acquisition upside? Thanks. Speaker 200:56:38Yes, I think so. I mean, I wouldn't really describe it as a philosophical change as much as us continuing with the philosophy of following the data and the analytics and putting our dollars where we feel that where we see the best returns. So naturally, as you noted, when you see an increase in performance on GNOG, then that would mean that more dollars should flow there because it's performing better and therefore should get a higher proportion of our acquisition spend. So we definitely are moving dollars around based on performance and what we're seeing and that's always been consistent with what we've done. But the result as you noted has been some shift towards that iGaming first customer acquisition investment, which I think again, it's all just kind of where do we get the best return, right? Speaker 200:57:24It's not that we think cross sell is inherently a better way of doing it. It was just and still is by the way that that's where we get the bulk of our iGaming customers and that's the most efficient means of doing it. But certainly where we see opportunity to invest directly in acquiring an iGaming first customer, we're also taking advantage of that. Speaker 1800:57:43Great. Thanks very much. Operator00:57:45One moment for our next question. Our next question comes from Lance Vitanza with TD Cowen. Your line is open. Speaker 1700:57:54Thanks guys. First of all, congratulations on the great quarter. I just have one question regarding the surcharge, but it does have 3 parts. Maybe just to focus on Illinois, can you talk about what percentage of the EBITDA loss due to the tax rate increase is the surcharge designed to recapture? I'm just trying to get a sense for the potential upside beyond the $900,000,000 to $1,000,000,000 guide to the extent that the surcharge is successful? Speaker 1700:58:20Obviously, I'm talking about fiscal 2025. Speaker 200:58:23Yes. So the way we calculated it is we set the amount such that we are targeting DraftKings covering 20% of gross revenue and taxes. And so basically the way to think of it is any tax rate that's higher than 20%, we would be paying up to the 20% and then the remainder would be the fee is designed to offset. So in a state like New York where the tax rate is 51%, that's a large number. Obviously, the big question is do we see any deterioration in handle and top line as a result. Speaker 200:59:04But you can do the math and see it would take quite a bit because if you think about 51% versus 20%, that's 60% of the taxes that we're paying in New York. And you can do the math on that from all the public reports, it's a big number. So you need to see a substantial decline in handle to get to a point where you were fully cannibalizing that. And obviously, if we saw that, we would reconsider our plan. But I think there's quite a bit of cushion there. Speaker 1700:59:36Well, and my gut tells me that customer activity would actually be highly inelastic, at least around mid single digit surcharge on winnings. But and I know you haven't done AB testing, but do you have any data that you've seen that would bear this out, I mean, other than just our guts? Speaker 200:59:56Yes. I think you're right, by the way. The best data we have is really from either other industries or from our industry in other parts of the world. There are other places where online gaming companies charge customers more because of the tax regime and countries like Germany or Australia as an example. It's not done exactly in this way, but it's conceptually very similar. Speaker 201:00:21Also, we noted this earlier on the call, but a number of industries from hotels to taxis, all have taxes in various states that get charged to the customer. And people may gripe about it, but I don't really see behavior change because of it. So you're right, it depends on the level. I think in the mid single digits, our belief is that when you compare it to sort of other industries as well as sort of what we got checked, think seems fair and seems reasonable to a customer. It seems like this is a good zone for us, but we'll only find out when we do it. Speaker 201:00:58It's hard. You can't really AB test something like that. Speaker 1701:01:02Right, right. And last part of my question, I'm glad that you're making the surcharge visible to consumers. As you point out, black market operators pay 0 tax, a 40% tax and obviously referring to Illinois here. That seems shortsighted, unfair and ultimately counterproductive. And I'm wondering if part of the calculus in making the visible, making the surcharge visible, is that intended to raise awareness around this issue? Speaker 1701:01:27Do you think you could possibly generate grassroots support for Speaker 201:01:37entered into our thinking. Obviously, you entered into our thinking. Obviously, you're right. When you have illegal operators paying 0 tax, that's pretty tough to compete with at any level. But when it starts getting higher than 20%, it just becomes untenable. Speaker 201:01:55So I do think that in absence of us doing something like this, why wouldn't more states consider it? It's not getting passed to their customers. They're not hearing from their constituents. And we haven't in New York done anything differently or nobody in the industry has. So I do think that this is something that may make some states reconsider because now they may be hearing more from their citizens that they don't like it. Speaker 201:02:21Obviously, they wouldn't be hearing anything if we from people that weren't being charged because it's not like I guess maybe they'd hear from like local teams that aren't getting as much sponsorship spend, but not from the massive voters that bet on sports. So but in the end, I think states are going to decide based on a number of I mean, if you look at some of the comparisons, Steve, I mentioned like taxis and hotels, it's not like you don't pay for that when you go to New York. So I think some states feel like because of where they are and because of the value proposition they bring that they can have higher costs in certain things. And that's not up to us. That's a policy decision that they're going to have to make. Speaker 201:03:03And as a business, we have to make the business decision that we have to make accordingly. But certainly, we will continue to advocate for taxes that allow us to compete more with the illegal market. And I'm hopeful and I believe most states do see that. If you look, most the vast majority of states around the country have tax rates of 20% or under. It's just a handful that don't. Speaker 1701:03:27Thanks, guys. Operator01:03:29Ladies and gentlemen, this concludes the Q and A portion of today's conference. I'd like to turn the call back over to Jason Robbins for any closing remarks. Speaker 201:03:36Well, thank you all for joining us on today's call. We are really optimistic about the second half of twenty twenty four and are excited and well positioned for success in the future 2025 and beyond. Thank you for your continued support. Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.Read morePowered by