Q3 2022 DraftKings Inc Earnings Call

November 4, 2022

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Ladies and gentlemen, thank you for standing by and walked through the draft Kings Q3, 2022 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star one on your telephone I would now like to turn the call over to your host Stanton Dodge Chief Legal officer.

You may begin.

Good morning, everyone and thanks 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 four.

Okay.

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 drop things operating performance. These measures should not be considered in isolation or as a substitute for draft Kings financial results prepared in accordance with GAAP reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.

Our available in our earnings presentation, which can be found on our website and.

And in our quarterly report on Form 10-Q filed with the SEC hosting the call today, we have Jason Robins co founder Chief Executive Officer, and Chairman of Draft Kings Hill.

Sure some opening remarks, and an update on our business adjacent Park, Chief Financial Officer, Droppings, who will provide a review of our financials. We will then open the line for questions I will now turn the call over to Jason Robins.

Good morning, everyone I hope you voluntarily at the first two months of NFL and college football as much as I have and are excited about all of the other sporting events going on including the MLB playoff and the FERC week season for the NBA and NHL. We're also getting ready for the start of college basketball and the World Cup later this month.

As you know the quality.

Exciting time of the year for drafting for passports calendar featuring the four major North American sports active at the same time as well as many other exciting events.

I want to discuss a few topics today, starting off with our very strong third quarter.

In short our product and technology trading customer service and marketing teams are executing extremely well, which resulted in the best multi state NFL kickoff in our history based on our September handle on gross revenue share.

We are very well prepared and I'm very proud of the team for executing so effectively.

Customers have enjoyed the new features that we rolled out around the start of the NFL season, such as quick Parlay quick same game part right and the ability to combine both testing game part of that.

Handle mix increased 500 basis points year over year in Q3, and our parlayed that next increased 500 basis points.

And our innovative early payout capability, otherwise known as Devin Upper 10, App engage both new and existing customers.

We had an excellent launching Kansas on September 1st with more rapid customer acquisition on a population adjusted basis and we have with any other state March resulting in very attractive cap rate.

In September we led the state in handle share with more than twice that of the second largest operator.

And based on data reported operator level handle on GTR data through September we're capturing GTR share that is at or above our long term target as industry activity continues to call last towards the very limited number of operators.

We announced in September that Amazon selected draft Kings as a sponsor and exclusive pre game out provider for Thursday night football on Prime video.

This is a unique opportunity to engage with customers in a true digital environment.

LT your collaboration with Amazon will deliver fans engaging pre game content and unique betting operators on Thursday throughout the NFL.

As part of our agreement with Amazon.

Football features drafting the integration is in its life pregame show, including Ards and additional sports betting impact.

Tracking and Amazon will also collaborate on TNF and offerings, including famed game parlay, which are available on the drafting sports book at.

Our content will be featured in all 15 Thursday night football games on Prime video during the 2022 NFL season.

In terms of financial our third quarter revenue was $502 million.

Higher than expected supported by favorable export outcomes as well as the aforementioned excellent execution across product technology trading customer service and marketing.

Adjusted EBITDA was negative $264 million also much better than anticipated due to flow through from higher revenue and expenses shifting out of Q3 into Q4, despite marketing investments into our Kansas launch that had not been included in the expectations that we provided in early August .

2022, it's been a transformative year for drafting we have shifted more attention towards cost controls and our path to profitability.

We identified over $100 million of annual cost savings and a significantly slowed year over year fixed cost growth as evidenced by our Q3 results.

What I'm most proud of though is that we've been able to do all of this while continuing to focus heavily on top line growth, winning competitively and most importantly on retaining and growing engagement with our customers.

We are also seeing a benefit to our marketing efficiency from shifting towards national advertising and away from local spending considering we're now live with mobile sports betting in 18 states that collectively represent 37% of the U S population.

The third quarter, we acquired more new customers at a 10% lower average Tac relative to the third quarter of 2021 and looking ahead, we would expect cash to decline as our state footprint continued to expand.

The progress we have made over the past year on our product customer service and internal operations has been tremendous and our Q3 results demonstrate all of these points with both revenue and adjusted EBITDA significantly exceeding our expectations.

It is evident that the hard work of our team. This year is paying off and we believe we are striking a great balance between maintaining an aggressive and customer focused growth plan, while simultaneously working to manage expenses.

This combination of revenue growth and expense management creates a clear path to profitability that is consistent with our long term gross margin and adjusted EBITDA margins that we've consistently articulated.

Now I'd like to move on to our financial outlook for 2022, we're excited to be raising the midpoint of our revenue guidance by $45 million.

We are also increasing the midpoint of our 2022 adjusted EBIT guidance by $10 million.

Guidance now includes our launch in Kansas as well as our expected launch in Maryland in Q4, and prelaunch marketing investment for Ohio.

The launch on January one 2023, with both Maryland, and Ohio, pending licensure and regulatory approval.

These three states were not included in our prior adjusted EBITDA guidance.

Therefore, we are improving our guidance. Despite the addition of these additional marketing investment.

We're also excited to share our initial 2023 outlook today, which reflects our core principle of maintaining strong growth in customer engagement. While also continuing on our path to profitability as well as having a cost structure that supports our long term margin goals.

For 2023, we are introducing revenue guidance of $2 eight 3 billion and.

And adjusted EBIT guidance of negative 575 million to $475 million.

Unlike our prior guidance our outlook now reflects our existing state footprint, including Kansas as well as expected launch it subject to licensure regulatory approvals in Maryland, Ohio, and Massachusetts, as well as Puerto Rico.

As we've stated previously we expect that the fourth quarter of 2023, only one year away from that will be our first quarter with positive adjusted EBITDA.

Additionally, as previously stated we are well positioned from a balance sheet standpoint to reach profitability under most reasonable equalization scenarios without needing to raise any additional capital.

We expect to end 2022 with a cash balance that is roughly double the high end of our guidance for adjusted EBITDA loss in 2023.

And while it's too early to guide full year 2024, our current multiyear plan suggests that will be approximately breakeven on a full year adjusted EBITDA basis in 2024, assuming legalization of loss trends remain consistent with prior years.

Looking ahead the outlook for state launches continue to be possible, we anticipate launching OSB in Maryland in the fourth quarter of 2022 in Ohio, Massachusetts in Puerto Rico in 2023, which would bring our penetration of the U S population to 45%.

Californians will vote on whether to legalize OSP on November eight we're still deploying grassroots effort, but the most recent polling suggests the likely unfavorable outcome for our coalition the drafting discontinued additional cash investment in the campaign. Please note the drafting 2022 cash investment in California was approximately $17 million.

And lastly, while it's still too early to know, which states may pass OSB Ni gaming legislation in 2023, we expect that several states we're actively considering legislation.

So theres a lot to be excited about on the regulatory front, we remain confident in our long term outlook to date, comprising 65% of the U S population will ultimately permit legalized OSB and <unk> comprising 30% of the U S population will ultimately permit legalized bagging.

Now I'd like to spend a few more minutes, providing additional detail on our recent product enhancements.

We have continued to expand the content and functionality of our product, which drives efficient customer acquisition as well as long term engagement and retention.

Adrian content, we launched for the 2022 NFL season included head to head matchup, several new multi play aircrafts and flash player market and full time and anytime squared.

Head to head match ups include spread Moneyline's in total is on all of our players.

Category to improve the depth of our derivative player offering multi play aircrafts include game and highest total from a list of options to increase the variety of player that tight.

Clear Flash cost include player specific next driving next pay markets to increase the depth of our player performance offering and full time at any time square is our motto driving squares product, which we've now extended to every game.

<unk> also added new functionality such as early payout for Moneyline wages quick parlay and quick themed game heartland as well as the ability for users to combine multiple pain gain parlay.

Early payout as our newly introduced mechanic to settle moneyline bats, one could team reaches a certain point, we quit partly as a new interface for customers to build larger parlays with more cross border play as well Chris.

Chris STP features dozens of prepackaged themed game parlay that per game for all thinking Parlay sport and STP Act allows customers to <unk> gain parlays with other thinking in par late in singles from different game, which increases the size and average like counterpart of late.

It has been an exciting 12 months of product and technology innovation enabled by our vertical integration with much more to come.

For I gaming, we recently introduced player contributed jackpots in response to customer demand and there is only operator in the U S. In house capability players can opt in for an additional modest wage here for a chance to potentially hundreds of thousands of dollars.

We believe this product functionality will increase customer engagement and demonstrates our continued differentiation from competition.

And now I will turn the call over to drafting CFO , Jason Park, who will discuss our third quarter results and refreshed outlook.

Thanks, Jason and Hello, everyone I'll start off by providing more granularity pertaining to Q3, and then I'll shift to the outlook for Q4 and 2023. Please note that all income statement measures discussed except for revenue are on a non-GAAP adjusted EBITDA basis.

We executed very well in Q3 customer activity was robust supported by new product functionality that we rolled out around the start of the NFL season. We have continued to look at detailed cohort data and are not seeing any discernible indication that the macroeconomic environment is impacting our overall customer engagement.

In Q3, we generated $502 million of revenue and negative $264 million of adjusted EBITDA, both significantly outperformed the expectations that we provided on our Q2 call in August our <unk> segment revenue increased 161% versus Q3 of 2021 as compared to Q2 2022 year over year growth.

68%.

Sport outcome, certainly were favorable to our operators this quarter lapping unfavorable outcome last year, our strong execution across acquisition retention and monetization initiatives for our core product offerings was also a driver of our outperformance.

In Q3 favorable support outcomes contributed approximately $70 million of revenue on our call in August we provided a rule of thumb for you to understand potential revenue volatility in Q3 as most of you are well aware it was an operator friendly quarter NFL underdogs generally did well in September for example, three of the biggest underdogs.

In week, one, including the Seahawk, the Steelers and Bears in addition, several Sunday Monday, and Thursday night football games fell in our favor. These games tend to attract higher handle per game relative to other NFL games and isolating just these 11 primetime games in the third quarter, our hold rate was greater than 10%.

It's important to note, we launched Kansas on September one and we have not included that in our prior guidance due to significant uncertainty about that launch date, Kansas generated negative $8 million of net revenue in the quarter consistent with our standard New state launched playbook, Kansas is off to a fantastic start.

Net revenue growth also benefited from a less promotional environment than in Q3 of 2021 for the industry as a whole we saw a more rational behavior, which we expect to persist and within the drafting business. We deployed more surgical promotions based on player specific gross profit profile and as we have consistently reiterated a REIT.

Investing less as cohorts mature.

We had $1 6 million monthly unique payers in Q3, which is 22% higher than the prior year period. It is important to remember that Q3 2021 included the conclusion of the NBA playoffs, while the NBA playoffs were completed before Q3 in 2022.

Notably in September alone <unk> increased 27% year over year to $2 7 million, which is typically our seasonally strongest month of the year for months due to the kickoff of the NFL season.

Average revenue per monthly unique payer or art month more than doubled on a year over year basis to $100 with solid gross margin flow through.

This balance of player growth and revenue per player growth is very healthy.

Promotional intensity naturally declines in states matured.

Adjusted EBITDA in Q3 was negative $264 million, which is $50 million better than the negative $314 million of adjusted EBITDA in the prior year period and significantly outperformed the expectations for Q3 that we provided on our August call, primarily due to the higher than anticipated revenue.

Our Q3 performance was especially impressive given that it included investment in our Kansas launch, which was not included in our previous guidance.

Additionally, certain expenses, principally within our marketing and G&A line items shifted out of Q3 and into Q4.

As a reminder, revenue upside driven by favorable outcomes and revenue downside driven by unfavorable outcomes typically flows through to our adjusted EBITDA at a high incremental margin given certain expenses within our cost of revenues are tied to deposits and handle rather than gross or net revenue.

Gross margin rate for Q3 was 34% and increased 100 basis points compared to the third quarter of last year on a year over year basis. The inclusion of New York and our continued mix shift out of our DFS product into our growing sports book, an argument products significantly limited our gross margin rate improvement. However, I was pleased that the <unk>.

OSB and arguments seats, where we were live prior to Q3 2021 saw an increase in gross profit of over $110 million, primarily due to revenue growth as well as a meaningful reduction in promotional intensity.

We continue to expect our gross margin rate to be approximately 40% for full year 2022 and to improve in 2023 into the low to mid 40% range as our promotional intensity naturally declines across our portfolio of states.

Sales and marketing expense was up 8% versus Q3 of 2021 for our states that have been live for more than a year external marketing spend was down 20% on a year over year basis, and we generated significant contribution profit from these seats in Q3 2022 compared to a deep loss in Q3, 2021, which was largely drip.

And by unfavorable outcomes.

We continue to be pleased with our LTV to CAC ratios and continue to be on track for three year gross profit payback.

As we mentioned on our Q2 call our fixed expense growth began to moderate meaningfully in the third quarter with product and technology, and general and administrative expenses up 37% and 28% respectively compared to the prior year period.

The growth in PMT expenses is primarily the result of the additional engineering and product management resources, we've added over the past year to help build the best product in the industry and to continuously strengthen our data science capabilities.

For G&A expense the growth is largely a reflection of the increased investment in our customer experience capabilities, which we expect will continue to grow as we add new customers, but at a slower pace than previous quarters as we reach scale and lap the significant investments. We made late in the second half of 2021 and early in 2022.

Moving into guidance. Please note that unlike the guidance that we've provided in the past. We are now guiding 2022, and 2023 inclusive of dates of heavily legalized and in which it is reasonably foreseeable that we will launch during the guided periods.

Typically our 2022 guidance now includes Kansas, which launched in September as well as Maryland, which we expect to launch in the fourth quarter and prelaunch marketing spend related to Ohio, which we expect to launch on January one 2023, both pending licensure and regulatory approvals.

Looking at 2022, we are pleased to be raising our full year revenue outlook to a range of $2 one to $2 $1 9 billion from a range of two eight.

To to $1 8 billion, which increases the midpoint of our guidance.

<unk> to $1 75 billion from $2 3 billion the midpoint of our increased revenue guidance implied 6% growth compared to the full year 2021.

We are increasing our revenue guidance due to the strength we saw in our online gaming vertical in Q3 for newly include States, We expect Maryland to contribute negative revenue as we invest in the state and the early reads following its launch in Q4.

We expect to generate about $790 million in revenue based on the midpoint of our 2022 revenue guidance, which represent substantial year over year growth and planned reinvestment in cuts.

Due to our significant unlucky outcomes early in the football season.

Our Q4 expectations also reflects continued softness in the broader NFC market, which has impacted our new rainmakers vertical.

Looking at Matson arm up we expect <unk> growth to be higher than <unk> growth for the full year.

Moving onto our adjusted EBITDA guidance, we're improving the midpoint of our full year 2022 guidance by $10 million to negative $790 million, Despite now, including Kansas, which launched in September as well as investments in expected state launches for Maryland, and Ohio.

The significant improvement in our 2022 adjusted EBITDA guidance on a comparable basis was primarily driven by higher revenue combined with cost discipline, particularly in the marketing and G&A expense lines.

I'm proud that we expect to land materially better than where we thought at the beginning of the year. Despite launching in new states. There has been an ongoing effort throughout the year to drive and capture efficiencies, which has resulted in more than 100 million of in year cost savings in 2022, we will continue to focus diligently on this area of the business for the remainder of this year and beyond.

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Finally, I want to reiterate that we continue to expect at least tendencies to be contribution profit positive for full year 2022.

Today, we are also introducing 2023 guidance for revenue and adjusted EBITDA, We expect revenue for full year 2023 to be between $2, eight and $3 <unk> billion and adjusted EBITDA for full year 2023 to be negative 575 to negative $475 million.

For our full year 2023 guidance, we are assuming that Maryland launches in Q4, 2022, Ohio, and Massachusetts launch in Q1 2023.

Puerto Rico launches in Q3 2023, we.

We expect to launch the new jurisdictions on a combined basis to generate less than 5% of full year 2023 revenue and to account for approximately 25% of our full year 2023 negative adjusted EBITDA.

In 2023, we expect gross margin to improve slightly relative to 2022, as we reduced promotional intensity and more mature states, partially offset by new state launches and continued mix shift out of DFS.

Our population weighted average age will be two six years exiting 2023 versus $1 eight years exiting 2022 and is that number appreciates. The gross margin rate is expected to improve dramatically, we expect fixed cost growth to slow meaningfully while variable marketing will largely depend upon how many new users we.

You acquired <unk>.

<unk> I'll touch on our liquidity position with close to $1 4 billion in cash as of September 30, and our guided adjusted EBITDA range for the fourth quarter combined with expected other usages were poised to exit the year with between $1 1 billion and $1 2 billion of cash.

Based on our 2023, adjusted EBITDA guidance and other expected cash usage is next year, we expect to end 2023 with more than $500 million in cash on the balance sheet. It's important to note that a significant amount of our 2022 cash outflows such as $97 million and net cash paid for G. Not are not expected to recur in 2023.

Looking out to 2024, we would expect adjusted EBITDA to be roughly breakeven on a full year basis under most reasonable legalization and launch scenarios.

So in summary, we believe we are well capitalized to become free cash flow positive with existing resources and the business is on a clear path to achieve our long term gross margin and EBITDA margin targets that.

That concludes our remarks, and we will now open the line for questions.

Ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your Touchtone telephone, we will pause for a moment, while we compile the Q&A roster.

Our first question comes from David Katz with Jefferies. Your line is open.

Hi, good morning, everyone.

I wanted to.

Just to touch on.

The Golden Nugget for a minute.

And I realize it's not right down the middle and probably why it isn't.

The core of discussion but.

I gaming becomes discuss more and more of its profit potential.

<unk>.

But long term growth et cetera, how are you doing with that.

What are you doing with that what can you share with us.

And how should we look at its prospects.

Please.

Thank you great question so.

Everything is going really well with the integration.

Starting to realize some synergies, particularly on the marketing side.

Really the biggest synergies will come next year, when we migrate the entire Golden Nugget operation onto our platform. So very excited about that that should hopefully be in the back half.

Of the year, we will complete that migration. So everything's on track teams are gelling really nicely.

Really excited about the future of Golden Nugget, as a way to penetrate deeper into the gaming market.

Can I follow up.

Please.

Is it.

Is it in and of itself and we were able to tell us.

Profitable today is.

Offsetting some of the investments that you're making on the <unk>.

OSB side.

<unk>.

Is it large enough to do that.

We haven't broken our Golden Nugget separately, but I believe we said that we expect any impact to the bottom line to be de Minimis.

Understood Alright 2022.

Understood. Thank you.

One moment for our next question.

Our next question comes from Shaun Kelly with Bank of America. Your line is open.

Hi, Good morning, everyone and thank you for taking my question.

Jason Jason just wanted to ask a little bit more about kind of hold versus product mix obviously.

Jason Robyn you outlined a bunch of new product initiatives, and you parlay Max being materially higher in the quarter.

Imagine a lot of those changes are here to stay so we're sort of trying to wrap our minds around go forward hold rates as some of these new product initiatives take hold and sort of what's the ability to push that percentage higher relative to what we saw in the quarter, which is obviously a lot of luck based outcomes as well. So if you could just talk about some of those trade offs and how you thought about it.

Or what's baked into 2023.

Yes, great question I think that.

A lot of progress has been made on the whole front, primarily driven by our improvement in that next year over year, that's largely been product as well as merchandising and marketing. So as mentioned, we launched a whole host of parlay same game power as well as.

Combinations of multiple same game parlays.

Launched Prepack. Many other features and I think the team has done a great job merchandising and marketing those two including through our NFL Thursday night football relationship with Amazon.

So lots of I think.

Parts of the company executing to drive that that mix and it's definitely improved hold rate and I think we should continue to see improvement we feel like theres a lot of tailwind there as far as what's baked in and we've been pretty cautious about baking and improvement I think.

Usually is the case with our guidance. We typically only include things that we have clear line of sight to I think 2022 has been a great example of that in February we guided to minus $875 million in EBITDA.

Now, we're guiding to minus 790, and Thats, what the inclusion of Ontario, Maryland, Ohio, and Kansas, which were not in the 875 million so almost $100 million better on the bottom line with the absorption of four state Slash province launches.

And that was because at the time, that's what we have line of sight too, but we rallied the team around a number of different cost initiatives throughout the year, we're able to over save over $100 million in your savings.

So thats typically how we approach guidance and I think it's the same thing here, where we're guiding to what we feel like we currently have line of sight to and can make a commitment to we very much view, our credibility and the most important thing and want to make sure. We're never signing up to a number that we don't think we can achieve but we always go out there and try to do better too and I think 2022 is a great.

Example of that where we continually throughout the year, we're able to improve guidance. Despite the launch of new states each and every quarter and so that's our goal every year and that's what we're going to try to do again in 'twenty three.

Great. Thank you and then maybe as my follow up could you just talk a little bit about how you're thinking about sort of some of these.

Fixed marketing investments relative or spa and sponsorship deals relative to to variable going forward, obviously, the big Amazon partnership you outline for Thursday night football.

Pn is another one where you have a relationship but there could potentially be more so just maybe strategically how are you thinking about.

Vesting in these.

These types of deals where maybe there is more committed spend relative to.

Two.

It could be more variable.

Or more directly tied to top line outcomes.

The majority of our marketing spend is not committed.

Completely controllable.

We're pretty selective with deals, but we feel really good about the Amazon deal I think it's one of the better deals that we've had in recent years and.

Very excited about the results we've seen through the first several weeks of Thursday night football with that one.

No most of our marketing spend is not committed we like to keep flexibility. So that we can optimize the internet of things.

Thank you very much.

One moment for our next question.

Our next question comes from Ed Young with Morgan Stanley . Your line is open.

Hi, My first question is just a clarification really.

Jason Park and the common.

Comments, but I wonder if you could quantify the EBITDA impact from Kansas and the key for investments in Maryland, and Ohio, just to give us a sense of your underlying assumptions you're making.

This is this year's guidance.

Then my broader question again, any sort of quantification would be useful about how you think about operating leverage into next year. So could you give us some color on the moving parts, particularly around promotions or you also the GTR NGL conversion.

Around the marketing ratio and your kind of opex growth versus cost down for next year. Thanks.

Yeah, Hey, great to hear from you Ed Yes, absolutely are our full year 2022 in the 2023 guide that we provided today includes Kansas, which has obviously already launched as well as the expected.

<unk> launch in Maryland, Ohio, and we've also included Massachusetts in Puerto Rico in terms of Q4.

What youre seeing there is a little bit of flow through from the slightly lower revenue outlook in Q4, and Thats slightly revenue lower revenue outlook is due to the planned reinvestment in very in a very surgical way for players who had unlucky hold in Q3.

As well as some headwinds from the Rainmaker a set of key products. So that's impacting the Q4 EBITDA, but the major change in the Q4 EBITDA is the inclusion of Maryland, and Ohio, which we.

Which we are now including in the Q4.

EBITDA Guide and then in terms of 2023 again, we are including Massachusetts, Maryland, Ohio, Puerto Rico, and as I mentioned on the call about 5% of the revenue guide comments from those new states and 25% of the EBITDA loss comes from those new states. So if you think about the implied flow through with.

Without new states, I think you're well north of a 60% implied flow through on the incremental revenue in 2023 on a no new state basis.

Yes, I think thats an important takeaway.

One of the things I think that is very different this year and this quarter I should say is that we guided with new states and we've never done that before I realize that's a shift and it's a response to investors, saying within if you have line of sight with relative certainty to state launch dates and we do and that we received our license in Maryland.

Not a certainty, but it's a pretty narrow window, we expect to launch there.

Pending of course, the additional approvals that we require the same thing in Ohio pending.

Approvals, Dave that Jan first as a launch date in Massachusetts. The Gaming Commission voted to launch in March So felt like those were sufficiently close enough around the quarter and had sufficient.

Certainty around at least a narrow range of timing, obviously, if something changes, we'll come back and update but.

That is a change in I think may have.

Muddied the waters, a little bit on some of the comparisons that did not include those states and as James Jason Park noted if you take out those states, we're guiding to under 400 million loss in 2023, So I think that we're at least some of the.

Analyst numbers out there that might be a more apples to apples comparison versus the guy. We just provided which was for the first time, including several new states.

And then add on your question just broadly on costs going into 2023, the I think the right way to think about it as you look at the 2023 guide.

The commentary on gross margin rate. If you. If you look at the implied total operating expense growth. I think you are looking at single digit growth rate going into 2023, we've talked about on the last few quarters are meaningfully slower fixed cost growth next year. So on a total opex.

Youre looking at single digits, and we're not breaking out how much of that is variable marketing versus fixed marketing.

But but.

Certainly a meaningful slowdown in cost and I've also mentioned that we're continuing to look for more and more opportunities on that front.

Thank you and appreciate all the detail that I don't think the $5 25 for the new launches next year is particularly useful to give us.

I'd like to like comparison, but just on the Q4 are you able to or you're not able to give us a.

Quantification of the investment for Maryland, and Ohio, the cost shift they make it to give at this point, you've obviously beaten quite decent in Q3 and not much has been passed on to the full year guide in terms of EBITDA. So just trying to think about what the underlying it looks like there.

What I do is.

I think you can flow through the revenue decline.

And that the revenue sort of a slightly lower revenue outlook in Q4 to the Q4 EBITDA and you can basically say the rest is due to the new states.

Perfect. Thank you.

One moment for our next question.

Yes.

Our next.

Comes from Jason Bazinet with Citi. Your line is open.

I just had a quick question on <unk>.

Sink or a pretty significant share gains that you've had across a number of states and I was just wondering if.

If you can confirm that that's true and then b.

Does that is that sort of tethered to the lower promotional activity, that's going on or would you pin that on some of the enhancements that you've made.

Thank you, yes, we did see a nice share increase to start NFL.

We typically do very well on NFL relative to other sport, so theres a little bit of seasonality in there, but if I had to point to it I would say the two things you touched on are the biggest drivers the product enhancements, which have been substantial we shipped a lot of stuff right before NFL and I think that created some real interesting points of differentiation.

As well as closed all material competitive gaps.

And then secondly, the lower sort of promotion, which is a larger.

Story really it's a subset of the more rational competitive environment, we're seeing.

This year versus last year was truly night and day as far as the competitive environment and the rationality behind it.

There is still certainly some aggressive investment by some of our competitors, but nothing that was.

I think out of the ordinary and I think certainly the.

Change in that promotion environment as well as in the external marketing spend of some of the competitors helped us gain some share as well.

But if I had to like I said point anything I would say the product enhancements that we made probably number one number two would be the more rationalized and competitive environment and then number three would be that this is seasonally typically a better time of year for us given our strength and NFL.

I'd like the ranking.

Thank you.

One moment for our next question.

Okay.

Our next question comes from Jed Kelly with Oppenheimer. Your line is open.

Hey, great. Thanks for taking my question just circling back on mobs.

Given your.

The higher hold did you see elevated churn in September and October and I think Jason you mentioned <unk> grew 27% September can you give us the October growth rate and then just a follow up question just on Amazon, Jason You mentioned strong customer engagement and you sort of speak to some of the metrics youre.

Seeing around engagement with Amazon.

Amazon Thursday night football deal. Thank you.

Sure.

I'll start on the second one so.

Really there is two things.

Ben I think the primary kind of.

The benefits of that relationship one or just new customers that we've acquired two is by really pushing.

Same game Parlay on Thursday night football, which is a perfect setup for the one game on so it's a great time to do that.

Seeing real material movement in that mix. So those have been two real positive stories from that partnership.

And as far as Marc I think the key thing with Marc has been net last year, if youre looking at the reasons why we broke out September because it is a little bit neither have a cleaner comparison.

But if you look at.

<unk> 2021 July had I think it was a few games of NBA <unk>.

So that drove up that July mops number quite substantially substantially whereas this year NBA ended in Q2, So we didn't get any Q3 MBA.

July obviously, given the way the <unk> calculation is doing.

It's one third of the calculation so that definitely would be I think the biggest kind of story and why the Q3 <unk> growth was less than the September <unk> growth.

And then on the flip side of that the really significant growth in art mob.

Part of that was the same thing because the denominator for last year included only some players that only participated in a handful of days in July they were primarily NBA players it didn't come back until until September for NFL.

That revenue number per player.

Numerator denominator thing looked a little bit better this year I think so.

Hard to tell given that the sports calendar changes year over year.

It's a bit of a complex thing, it's always hard to kind of tell which is why we don't guide to mops and art.

It's a nice kpis in good measure of the health of the business, but yet into things like predicting as the NBA playoffs going to go into July when you start thinking about guiding to mops.

<unk>. So we've just sort of stayed away from it because.

It's a little volatile given this four calendar changes.

Got it.

Churn has sort of been in line with.

We thought it would be given the.

Above average oleds.

Yes, I mean, I think that when you know.

We look at churn we look at it on a player by player basis. So.

There's certainly been some optimizations, we've made our year over year to pare back bonus hunters.

Other sorts of things that I think is good churn but.

As far as the underlying health of the cohorts, we're seeing the same thing that we've seen in previous quarters.

Continue to see no real impact from anything micro like higher hold nor.

In terms of churn.

Nor are we seeing any impact from the macroeconomic environment either so we can continue to keep an eye on that that's something we monitor very closely but the cohorts from all respects look very healthy to us.

Thank you.

One moment for our next question.

Our next question comes from Carlo Santarelli with Deutsche Bank. Your line is open.

Okay.

Hey, guys. Thank you.

Just back on that point.

Thank you.

You mentioned earlier.

The three key unfavorable loss kind of led to some some tactical reinvestments and the <unk> are that youre programming for the <unk> I am assuming most of that was in October but.

As you think about you.

Your experience to date with players whose accounts have basically gone to zero what is the retention looks like on that customer once they've already kind of gone through their funding.

Yes.

It's a good question I think thats, probably a little granular for what we'd like to cover on an earnings call, but what I will say is that.

We have quite a few model based trigger campaign set up to try to.

Reach players before their balances go down to zero.

I think that also reinvestment.

Reinvestment and you noted that's part of why Youre seeing the Q3 to Q4 excuse me Q4 into Q3 revenue shift we actually last quarter, we did it the other way around but then given the outcomes came in we flipped at this time.

That is a result of us trying to make sure that our players are staying active that when there are negative sport outcomes were.

Giving them good promotions to get them to reactivate.

And then there is an overall sort of amount of return to player that we are still I mean, it's.

The ultimate question, but.

Some that are uncontrollable export outcome some of their controllable like promotional intensity and theres, probably an optimal total return to player that.

It needs to be reached and it's probably different for different segments of players and we're constantly trying to optimize that equation.

Great. Thank you and then if I could just one follow up as it pertains to the balance sheet.

Cash used in the period was about $132 million.

You guys spent I think somewhere in kind of software costs et cetera, $22 million or so in the period and at the $264 million EBITDA loss of $150 million gap us it looks like a source of cash could you kind of bridge that for me is that something that.

But this one in there.

Yes, Carlos so basically the major part of the bridge, it's a working capital source of cash in Q3. So if you recall back in Q1 Q2.

Uses of cash in Q3, as a source of cash and I would just comment that on a full year basis, we don't I don't anticipate working capital being a meaningful source where use of cash.

With businesses of our type.

Great. Thanks, guys I appreciate it thank you.

One moment for our next question.

Our next question comes from Michael Graham with Ken.

Ken Accord Genuity your line is open.

Hey, thanks.

First question is just you mentioned the national advertising mix and I, just wonder if you could.

Give us an update on where you are in the arc of transforming that mix and what do you expect kind of a terminal mix between national and local and then I just wanted to ask Jason about how youre thinking about the probability I guess that the U S economy and go into a recession next year, how would you expect that to impact your business.

How is it affecting your planning.

Yeah. Good question so on the first one.

We've over the last few years said that as well.

We get to north of around 35% of the population, having legal online sports betting that would be a turning point, where national advertising would start to become in many cases more efficient.

And then local advertising, we're just crossing that threshold now we are in states that represent about 37% of population. So just starting to see some small impacts in favorability from that.

As I think we noted on the call we add tax that were 10% better than we expected and we actually beat our total forecast for new customers acquired so we were able to get scale and efficiency and I think part of that is starting to get a little bit of benefit from this national advertising shift that should only continue to increase we have states right now that.

<unk>, 8% of the population that are in the next five months or so projected to launch the ones that we mentioned, Maryland, Ohio and Massachusetts.

Pending licensure and regulatory approvals of course.

That will really start to add additional tailwind and then it really just continues to go from there because.

As each new state comes on you're reaching customers that already are seeing those national ads, you don't have to advertise locally as much in anymore. So really I think a big tailwind behind our back now and Youre starting to see that in some of the Q3 results.

And then I'm sorry, what was the second question.

Just how youre thinking about a recession a possible recession, yes, so we definitely looked at different scenarios, where.

If there were some kind of recession and if it were impactful to consumer behavior of our segment of customers that you know what.

Could that look like what would that mean for revenue next year, what would that mean for how we have to manage costs.

So we're well prepared for that and right now we're not seeing any sign of that so we're managing to the environment that we're seeing but we are prepared to shift pretty quickly. If we do start to see anything that concerns us.

Fortunately right now, we're not seeing that but always good to be prepared.

Thank you.

One moment for our next question.

Okay.

Our next question comes from Bernie Mcternan with Needham Your line is open.

Great. Thank you for taking the questions.

Since you last struck a partnership deal with ESPN, even though it's just a short time ago. The landscape of the U S. Sports betting has changed a lot so thinking about key priorities with any media partnership now as we sit here versus versus a couple of years ago are there any major changes that you would say you would look for now that maybe werent a key priority of couple of years ago.

I think with any anything we're doing we're looking at it the same way, which is what is the impact of any.

Partnership we might establish on our financials over the course of the partnership and if relevant beyond and.

Does that check out against what we view as the extent of the partnership so really that's how we evaluate everything.

If you look at it kind of down to some of the more specific kpis as noted in the past we look at grocery gross profit paybacks of three years or less for new customers and I think that's something that always comes into play because many partnerships with media companies are mostly about customer acquisition. So that's really how we've always looked at it nothing has changed.

Much there I will say that the environment has improved dramatically year over year in that.

Some of the deals that.

Really at that time, I think last year.

We had to pass on.

I think in today's environment would it be more rationally priced so.

We're always keeping an eye out for opportunities, but also as I noted earlier, we have more than half of our marketing spend.

And actually for Kansas excuse me more than two thirds of our marketing spend is variable and we like to keep flexibility around being able to optimize in and out of things. So.

Always very careful before doing any partnerships that we have historical data from testing on those channels and feel very good about the commitments, we're making in light of the benefits that we expect to receive great. That's really helpful. And then as a follow up you spoke about the same profitability framework for <unk> 'twenty, three irrespective of California path.

Now it doesn't seem like California's going to pass and Youre not going to have those customer acquisition costs in the quarter are those can be redeployed into anywhere else that maybe now you have the luxury of spending on that you didn't that there is a chance you wouldn't have prior.

That's a great question and the answer is yes. So we had a California plan in a non California plan, obviously anything can happen if we all wake up on Tuesday.

Wednesday, I guess and find out if passed then we'll.

We will pivot back to the California plan, but it wasn't the same plan it wasn't as simple as saying, we tack on California to what we just guided to now there are definitely tradeoffs that would've needed to be made and that we are prepared to make if california were to launch so.

Great question, and I think really what we have continuously said is that we are absolutely committed to controlling our own destiny that we have a clear path to profitability with cushion on the cash balance that we have today and that was irrespective of whether California launched or not and so.

We had two different plans one with an wasn't without California, right now of finance executing that without finfet looks like where it's going but we're ready to pivot on a dime, if we get a pleasant surprise, although that's certainly not what I'm expecting next week.

Okay. Thanks, Jason.

One moment for our next question.

Our next question comes from Ryan <unk> with Craig Hallum. Your line is open.

Good morning, guys too.

Two questions for US first one curious partly its a big focus obviously for everybody and you guys, but what about in game betting.

How has that trended as a percent of sales last few quarters, and then expectations going forward.

So in game betting is definitely also an area of focus we have seen.

Since we've launched continued improvement.

Mix of live betting.

One of the really interesting things about the early wind promo that we ran this year is that part of the design behind it with.

You are paying out in game and can we use that to then.

And then merchandise and drive more live betting and we've seen really good.

I think impact from when we've had those early payouts on driving up live betting. So definitely continues to be a focus I know we've talked about parlay a lot but that's.

And that's just because we felt like that was where the biggest gap was competitively on that that mix side and why we are holding below.

No.

At least <unk>, so I think that thats.

That's really why we've talked a lot about that but it doesn't mean internally that live betting hasnt been a big focus and it continues to be it's a great way of keeping the customer engaged throughout the game.

And then.

Just as I think about <unk> relative to <unk>. It seems like you guys are a bit more aggressive.

Speaking on you mentioned early win and some of those other creative promotions and reinvestment and some temporary short term on lucky players et cetera outcomes, but a little bit less on the national advertising. How do you think about balancing new player bonuses versus existing player retention loyalty versus national and kind of brand.

<unk> marketing.

<unk>.

Yes.

A very important question and it's one of those along with the kind of return to player question.

I mentioned earlier.

Really important for us to continue to optimize what's the right balance of if you think of all of it is sort of this broad category of marketing.

What's the right balance of advertising spend versus promotional spend and I think we're still along our journey of figuring that out.

But definitely get smarter every day and I think this year, we were able to improve how we've optimized against both such that the overall rate of promotion was lower for us this year our advertising spend.

On a per customer basis cat, our CAC I should say has improved we mentioned 10% better than expected in Q3 this year.

And we've been able to do all that while still hitting or exceeding our new customer targets. So.

I feel like we've made great progress there, but there's still a lot of work to be done to figure out the right balance of where those investments are made.

Thank you one moment for our next question.

Our next question comes from Joe Stauff with Susquehanna. Your line is open.

Thanks, Good morning.

First question I, just wanted to maybe to follow up on on kind of users.

I think you said for the full year Jason Park.

Relationship between Mops and monetization.

More monetization, but I was wondering.

Yes.

To what degree I mean, obviously in the third quarter you had.

22%.

<unk> growth and significant monetization just wondering if you can.

Hey, tighten up.

Expectations.

In terms of that relationship in the fourth quarter and really how you think about it based on your 2023 guidance.

Yes, so great question I think some of it is controllable most of it's not a big reason why.

He saw substantially more art mark them up growth in this quarter in Q3, I should say with that yet MBA bleed into July last year and this year you didn't so that obviously drove the denominator up last year drove it down this year, but then in turn also increase the art map. So.

I think some of that is sort of just four calendar dependent.

For us we're trying to maximize total long term player LTV, regardless of how of what form that comes in so we don't really look at it as one is better than the other its more how do we maximize the LTV that were generating from the players that we acquire.

That's really what guides us in.

I think in the short term, we look at maximizing revenue, but also.

Making sure that we're not doing that at the expense of future revenue either so.

Really we look at it more holistically and I think those kpis are more just a measure for us to understand on underlying what's going on in the business.

Makes sense and then as a follow up I was wondering what your expectations were for World Cup relative to your <unk> Guide.

Yes.

Cup will be interesting we havent.

Really talk too much about it we're not breaking it out separately as we don't with any other sports so it'll be interesting to see what kind of engagement, we get and I think that's probably one of the examples of something that if it.

<unk> outperforms, our expectations could be a positive catalyst for the quarter, but we don't have a ton of data on World Cup. So it's really tough to say what to expect from it and certainly Joe not a lot of data of World Cup in Q4, yeah.

It's a big difference.

And can I just squeeze a last one in just in terms of your DFS is.

How did DFS I guess performance third quarter or is it still like low single digit type grower.

Yes, that's about right.

<unk> continues to be a slow grower for us, but one that is very important because in addition to providing.

Revenue that flows through at a very high margin. It also is really a huge source of of.

New customers for US every time, we enter a new state for OSB or <unk>.

Thanks, guys.

One moment for our next question.

Our last question comes from Jordan Bender with JMP Securities. Your line is open.

Great. Thanks for taking my question on.

On the <unk> side can you talk about the pace of new content coming onto your platform and then maybe any improvements you've made on that end.

Yes, the biggest thing that we just launched and this was a big one that was a lot of work in the making very proud of the product team was our jackpot functionality, it's totally unique to the market no one else no. Other operators have it basically allows players to opt in.

Two a separate jackpot pool.

Which then once it hits gets paid out usually at very high some so really.

Really appealing interesting attractive product that I think.

<unk> made a lot of what players are looking forward to the opportunity to put a small amount of money to work and potentially get a big payday.

Very excited about that that's the most significant thing we've launched throughout the year, though we've been launching tons of new content.

Lots of games, some of which are homegrown and unique some of which are through third party integrations, but always looking to build out the content and <unk>.

Make sure that we have both the best and most popular titles out there, but also unique and differentiated offerings like our rocket game or like this jackpot functionality that we just recently launched.

Great. Thanks, Jason.

Thank you.

I would like to turn the call back over to Jason Robins CEO for any closing remarks.

Thank you for all joining us today on the call. We had an excellent third quarter really excited about performance there and we feel we're really well positioned for a very strong finish to 2022 and really well set up for 2023 going into 2024, which we expect to be roughly breakeven potentially here are first for a profitable year in <unk>.

And of course Q4 of 2000.

2023, which we expect to be our first quarter of positive adjusted EBITDA. So very excited about the future of only one year, where we think from our first positive adjusted EBITDA quarter.

I look forward to speaking with you all over the next few weeks and hope everybody stays safe and well and enjoys a very exciting time in the sports calendar through the remainder of the year. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Ladies and gentlemen.

The conference will begin shortly to raise Johan during Q&A you can dial one one.

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Ladies and gentlemen, thank you for standing by and walk through the draft Kings Q3, 2022 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the special need to press Star one on your telephone I would now like to turn the call over to your host Stanton Dodge Chief Legal Officer, you may begin.

Okay.

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 dropdowns operating performance. These measures should not be considered in isolation or as a substitute for draft Kings financial results prepared in accordance with GAAP reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.

Are available in our earnings 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 Robins co founder Chief Executive Officer, and Chairman of Draft Kings, who will share some opening remarks, and an update on our business and adjacent park Chief Financial Officer Droppings Who'll provide a review of our financials. We will then open the line to questions.

I will now turn the call over to Jason Robins.

Good morning, everyone I hope you voluntarily at the first two months of NFL and college football as much as I have and are excited about all of the other sporting events going on including the MLB playoff and the FERC two week season for the NBA and NHL. We're also getting ready for the start of college basketball and the World Cup later this month.

As you know Paul it's always a very exciting time of the year for tracking for the Pac point calendar featuring the four major North American sports active at the same time as well as many other exciting events.

I wanted to discuss a few topics today, starting off with our very strong third quarter.

In short our product and technology trading customer service and marketing all executed extremely well, which resulted in the best multi state NFL kickoff in our history based on our September handle on gross revenue share.

We are very well prepared and I'm very proud of the team for executing so effectively.

Customers have enjoyed the new features that we rolled out around the start of the NFL season, such as quick Parlay quick same game parlay and the ability to combine both interesting game part of late.

Our parlay handle mix increased 500 basis points year over year in Q3, and our parlay that next increased 500 basis points.

And our innovative early payout capability, otherwise known as seven of our 10, app engage both new and existing customers.

We had an excellent launching Kansas on September 1st with more rapid customer acquisition on a population adjusted basis than we have with any other state March resulting in very attractive cap.

For the month of September we led the state in handle share with more than twice that of the second largest operator.

And based on the safety of reported operator level handle in GTR data through September we're capturing GTR share that is at or above our long term target as industry activity continues to call last towards the very limited number of operators.

We announced in September that Amazon selected draft Kings, and the sponsor and inclusive pregame provider for Thursday night football on Prime video. This is a unique opportunity to engage with customers in a true digital environment, our multi year collaboration with Amazon will deliver fans engaging pre game content and unique bedding operators on Thursday throughout the NFL.

As part of our agreement with Amazon Thursday Night Football features Dropkin integration is in its life pregame show, including Ards and additional sports betting inside.

Tracking to an Amazon will also collaborate on TNF themed offerings, including Sanjay and parlay, which are available on the drafting sports book at.

Our content will be featured in all 15 Thursday night football games on Prime video during the 2022 NFL season.

In terms of financial our third quarter revenue was 502 million much higher than expected supported by favorable support outcomes as well as the aforementioned excellent execution across product technology trading customer service and marketing.

Adjusted EBITDA was negative $254 million.

Also much better than anticipated due to flow through from higher revenue and expenses shifting out of Q3 into Q4, despite marketing investments into our Kansas launch that had not been included in the expectations that we provided in early August .

2022, it's been a transformative year for drafting we have shifted more attention towards cost controls and our path to profitability.

We identified over $100 million of annual cost savings and a significantly slowed year over year fixed cost growth as evidenced by our Q3 results.

What I'm most proud of though is that we've been able to do all of this while continuing to focus heavily on topline growth winning competitively and most importantly on retaining and growing engagement with our customers.

In the third quarter, we acquired more new customers at a 10% lower average CAC relative to the third quarter of 2021 and looking ahead, we would expect cash to decline as our state footprint continues to expand.

This combination of revenue growth and expense management creates a clear path to profitability that is consistent with the long term gross margins and adjusted EBITDA margins that we've consistently articulated.

Now I'd like to move on to our financial outlook for 2022, we're excited to be raising the midpoint of our revenue guidance by $45 million.

We are also increasing the midpoint of our 2022 adjusted EBIT guidance by $10 million. Our guidance now includes our launch in Kansas as well as our expected launch in Maryland in Q4, and prelaunch marketing investment for Ohio.

Back to launch on January one 2023, with both Maryland, and Ohio, pending licensure and regulatory approval.

These three states were not included in our prior adjusted EBITDA guidance.

Therefore, we are improving our guidance. Despite the addition of these additional marketing investment.

We are also excited to share our initial 2023 outlook today, which reflects our core principle of maintaining strong growth in customer engagement. While also continuing on our path to profitability as well as having a cost structure that supports our long term margin goals.

For 2023, we are introducing revenue guidance of $2 eight 3 billion.

And adjusted EBITDA guidance of negative 575 million to $475 million.

Unlike our prior guidance our outlook now reflects our existing state footprint, including Camden as well as expected launches subject to licensure regulatory approvals in Maryland, Ohio, and Massachusetts, as well as Puerto Rico.

As we've stated previously we expect that the fourth quarter of 2023, only one year away from now will be our first quarter with positive adjusted EBITDA.

Additionally, as previously stated we are well positioned from a balance sheet standpoint to reach profitability under most reasonable legalization scenarios without needing to raise any additional capital.

We expect to end 2022 with a cash balance that is roughly double the high end of our guidance for adjusted EBITDA loss in 2023.

And while it's too early to guide full year 2024, our current multiyear plans suggest that will be approximately breakeven on a full year adjusted EBITDA basis in 2024, assuming legalization in loss trends remain consistent with prior years.

Looking ahead the outlook for state launches continue to be possible, we anticipate launching OSB in Maryland in the fourth quarter of 2022 in Ohio, Massachusetts in Puerto Rico in 2023, which will bring our penetration of the U S population to 45%.

Californians will vote on whether to legalize OSP on November eight we're still deploying grassroots effort, but the most recent polling suggests the likely unfavorable outcome for our coalition the drafting discontinued additional cash investment in the campaign. Please note that draft in 2022 cash investment, California was approximately $17 million.

And lastly, while it's still too early to know, which states may pass OSB Ni gaming legislation in 2023, we expect that several states, we'll actively consider legislation.

So theres a lot to be excited about on the regulatory front, we remain confident in our long term outlook to date, comprising 65% of the U S population will ultimately permit legalized OSB and taste comprising 30% of the U S population will ultimately permit legalized bagging.

Now I'd like to spend a few more minutes, providing additional detail on our recent product enhancements we.

We have continued to expand the content and functionality of our affordable product, which drives efficient customer acquisition as well as long term engagement and retention.

Adrian content, we launched for the 2022 NFL season included head to head matchup several new multi play aircrafts and flash player market and full time in any times square.

Head to head match ups include spread Moneyline's in total is on all of our player.

Category to improve the depth of our derivative player offering multiplayer crops include game and highest total from a list of options to increase the variety of players that tight.

Clear Flash cost include player specific next driving next pay market to increase the depth of our player performance offering in both time and any time square is our model driven squares product, which we've now extended to every game of the season.

<unk> also added new functionality such as early payout for Moneyline Wagered quick parlay and quick thing gain partly as well as the ability for users to combine multiple pain gain parlay.

Early payout as our newly introduced mechanic to settle moneyline, that's what the team reaches a certain point, we quit partly as a new interface for customers to build larger parlays with more cross border play as well Chris.

Quick STP featured dozens of prepackaged themed game parlay that per game for all same game private sport and STP acts allowed customers correlating game parlays with other thinking parlays in singles from different game, which increases the size and average like counted parlayed.

It has been an exciting 12 months of product and technology innovation enabled by our vertical integration with much more to come.

For I gaming, we recently introduced player contributed jackpots in response to customer demand and our only operator in the U S. In house capability players can opt in for an additional modest wage here for a chance to potentially hundreds of thousands of dollars.

We believe this product functionality will increase customer engagement and demonstrates our continued differentiation from competition.

And now I'll turn the call over to drafting CFO , Jason Park, who will discuss our third quarter results and refreshed outlook.

Rate of 68%.

Sport outcome, certainly were favorable to our operators this quarter lapping unfavorable outcomes last year, our strong execution across acquisition retention and monetization initiatives for our core product offerings was also a driver of our outperformance.

In Q3 favorable sport alkermes contributed approximately $70 million of revenue on our call in August we provided a rule of thumb for you to understand potential revenue volatility in Q3 as most of you are well aware you with an operator friendly quarter NFL underdogs generally did well in September for example, three of the biggest underdog.

In week, one, including the Seahawk, the Steelers and Bears in addition, several Sunday night Monday, and Thursday night football games fell in our favor. These games tend to attract higher handle per game relative to other NFL games and isolating just these 11 primetime games in the third quarter, our hold rate was greater than 10%.

It's important to note, we launched Kansas on September one and we have not included that in our prior guidance due to significant uncertainty about that launch date, Kansas generated negative $8 million of net revenue in the quarter consistent with our standard new seat launch playbook, Kansas is off to a fantastic start.

Net revenue growth also benefited from a less promotional environment than in Q3 of 2021 for the industry as a whole we saw more rational behavior, which we expect to persist and within the draft jeans business. We deployed more surgical promotions based on player specific gross profit profile and as we have consistently reiterated a REIT.

Investing less as cohorts mature.

We had $1 6 million monthly unique payers in Q3, which is 22% higher than the prior year period. It's important to remember that Q3 2021 included the conclusion of the NBA playoffs, while the NBA playoffs were completed before Q3 in 2022.

Notably in September alone Mumps increased 27% year over year to $2 7 million, which is typically our seasonally strongest month of the year for months due to the kickoff of the NFL season.

Average revenue per monthly unique payer or art.

Than doubled on a year over year basis to $100 with solid gross margin flow through this balance of player growth and revenue per player growth is very healthy.

Promotional tends to be naturally declines in states matured.

Our Q3 performance was especially impressive given that it included investment in our Kansas launch, which was not included in our previous guidance.

Additionally, certain expenses, principally within our marketing and G&A line items shifted out of Q3 and into Q4.

I was pleased that the OSB and <unk>, where we were live prior to Q3 2021 saw an increase in gross profit of over $110 million, primarily due to revenue growth as well as a meaningful reduction in promotional intensity.

By unfavorable outcomes.

We continue to be pleased with our LTV to CAC ratios and continue to be on track for three year gross profit payback.

As we mentioned on our Q2 call our fixed expense growth began to moderate meaningfully in the third quarter with product and technology and general and administrative expense was up 37% and 28% respectively compared to the prior year period.

Looking at 2022, we are pleased to be raising our full year revenue outlook to a range of two <unk> to $2 $1 9 billion from a range of $2.

To to one 8 billion, which increases the midpoint of our guidance.

<unk> to $1 75 billion from $2 3 billion.

Mid point of our increased revenue guidance implies 16% growth compared to the full year 2021.

In Q4.

We expect to generate about $790 million in revenue based on the midpoint of our 2022 revenue guidance, which represents substantial year over year growth and planned reinvestment in cuts for two a significant unlucky outcomes early in the football season.

Our Q4 expectations also reflects continued softness in the broader NFC market, which has impacted our new rainmakers vertical.

Looking at Matson arm up we expect our growth to be higher than <unk> growth for the full year.

I am proud that we expect to land materially better than where we thought at the beginning of the year. Despite launching in new states. There has been an ongoing effort throughout the year to drive and capture efficiencies, which has resulted in more than $100 million of in year cost savings in 2022, we will continue to focus diligently on this area of the business for the remainder of this year and beyond.

<unk>.

Finally, I want to reiterate that we continue to expect at least 10 states to be contribution profit positive for full year 2022.

For our full year 2023 guidance, we are assuming that Maryland launches in Q4, 2022, Ohio, and Massachusetts launched in Q1 2023.

Puerto Rico launches in Q3 2023, we.

We expect launches in new jurisdictions on a combined basis to generate less than 5% of full year 2023 revenue and to account for approximately 25% of our full year 2023 negative adjusted EBITDA.

Our population weighted average age will be two six years exiting 2023 versus one eight years exiting 2022 and is that number appreciates. The gross margin rate is expected to improve dramatically, we expect fixed cost growth to slow meaningfully while variable marketing will largely depend upon how many new users we.

You acquired <unk>.

Last I'll touch on our liquidity position with close to $1 4 billion in cash as of September 30, and our guided adjusted EBITDA range for the fourth quarter combined with expected other usages were puds to exit the year with between $1 1 billion and $1 2 billion of cash.

Looking out to 2024, we would expect adjusted EBITDA to be roughly breakeven on a full year basis under most reasonable legalization and launch scenarios.

That concludes our remarks, and we will now open the line for questions.

Ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your Touchtone telephone, we will pause for a moment, while we compile the Q&A roster.

Our first question comes from David Katz with Jefferies. Your line is open.

Hi, good morning, everyone.

I wanted to.

Just to touch on.

Golden Nugget for a minute.

And I realize it's not right down the middle and probably why it isn't necessarily core the discussion but.

I gaming becomes discuss more and more of its profit potential.

Yes.

Long term growth et cetera, how are you doing with that.

What are you doing with that what can you share with us.

And how should we look at its prospects.

Please.

Thank you great question so.

Everything is going really well with the integration.

Starting to realize some synergies, particularly on the marketing side.

Really the biggest synergies will come next year, when we migrate the entire Golden Nugget operation onto our platform. So very excited about that that should hopefully be in the back half.

Of the year, we will complete that migration. So everything's on track teams are gelling really nicely.

Really excited about the future of Golden Nugget, as a way to penetrate deeper into the gaming market.

Can I follow up.

Please.

That is.

Is it in and of itself and we were able to tell us.

Profitable today is offsetting some of the investments that you're making on the OSB side.

On.

Is it large enough to do that.

We haven't broken our Golden Nugget separately, but I believe we said that we expect any impact to the bottom line to be de Minimis.

Understood Alright 2022.

Yeah understood. Thank you.

One moment for our next question.

Our next question comes from Shaun Kelly with Bank of America. Your line is open.

Hi, Good morning, everyone and thank you for taking my question.

Jason Jason just wanted to ask a little bit more about kind of hold versus product mix obviously.

Jason Robyn you outlined a bunch of new product initiatives, and you parlay Max being materially higher in the quarter.

Or what's baked into 2023.

Yes, great question I think that.

We launched a whole host of parlay same game power as well as combinations of multiple same game parlays.

Launched Prepack. Many other features and I think the team has done a great job merchandising and marketing those two including through our NFL Thursday night football relationship with Amazon So lots of I think.

Parts of the company executing to drive that that mix and it's definitely improved code right and I think we should continue to see improvement we feel like Theres a lot of tailwind there as far as what's baked in and we've been pretty cautious about baking and improvement I think as usually is the case with our guidance. We typically only include things that we have clear line of sight to I think 2002.

'twenty two it's been a great example of that in February we guided to minus $8 $75 million in EBITDA.

Now, we're guiding to minus 790, and Thats, what the inclusion of Ontario, Maryland, Ohio, and Kansas, which were not in the 875, so almost $100 million better on the bottom line with the absorption of four state Slash province launches.

And that was because at the time, that's what we have line of sight to you, but we rallied the team around a number of different cost initiatives throughout the year, we're able to over Dave over $100 million in your savings.

So that's typically how we approach guidance and I think it's the same thing here, where we're guiding to what we feel like we currently have line of sight to and can make a commitment to we very much view, our credibility and the most important thing and want to make sure. We're never signing up to a number that we don't think we can achieve but we always go out there and try to do better too and I think 2022 is a great.

Great. Thank you and then maybe as my follow up could you just talk a little bit about how you're thinking about sort of some of these.

Fixed marketing investments relative or start and sponsorship deals relative to to variable going forward, obviously, the big Amazon partnership you outlined for Thursday night football.

<unk> is another one where you have a relationship but there could potentially be more so just maybe strategically how are you thinking about.

Vesting in these.

These types of deals where maybe there is more committed spend relative to <unk>.

Two.

It could be more variable.

Or more directly tied to top line outcomes.

The majority of our marketing spend is not committed.

Completely controllable.

We're pretty selective with deals, but we feel really good about the Amazon deal I think it's one of the better deals that we've had in recent years and.

Very excited about the results we've seen through the first several weeks of Thursday night football with that one.

But no most of our marketing spend is not committed we like to keep flexibility. So that we can optimize the internet of things.

Thank you very much.

One moment for our next question.

Our next question comes from Ed Young with Morgan Stanley . Your line is open.

Hi, My first question is just a clarification radio you touched Jason Park in the comment.

Comments, but I wonder if you could quantify the EBITDA impact from Kansas and the key for investments in Netherlands in Ohio, just to give us a sense of your underlying assumptions you're making.

This is this year's guidance.

Around the marketing ratio and your kind of opex growth versus cost down for next year. Thanks.

Yeah, Hey, great to hear from you Ed Yes, absolutely are our full year 2022, and the 2023 guide that we provided today includes Kansas, which have obviously already launched as well as the expected.

<unk> launched in Maryland, Ohio, and we've also included Massachusetts in Puerto Rico in terms of Q4.

What youre seeing there is a little bit of flow through from the slightly lower revenue outlook in Q4 in that slightly revenue lower revenue outlook is due to the planned reinvestment in very in a very surgical way for players who had unlucky hold in Q3.

As well as some headwinds from the Rainmaker a set of key products. So that's impacting the Q4 EBITDA.

EBITDA, but the major change in the Q4 EBITDA is the inclusion of Maryland, and Ohio, which we.

Which we are now including in the Q4.

Without new states, I think you're well north of a 60% implied flow through on the incremental revenue in 2023 on a no new state basis.

Yes, I think thats an important takeaway.

The things I think that.

It is very different this year and this quarter I should say is that we guided with new states and we've never done that before you realize thats a shift and it's a response to investors, saying listen if you have line of sight with relative certainty to state launch dates and we do and that we received our license in Maryland, it's not a certainty, but they're pretty.

The narrow window, we expect to launch their same pending of course additional approvals that we require.

Same thing in Ohio pending.

Around at least a narrow range of timing, obviously, if something changes, we'll come back and update but.

That is a change in I think may have.

Muddied the waters, a little bit on some of the comparisons that did not include those states.

As James Jason Park noted if you take out those states, we're guiding to under 400 million loss in 2023, So I think that we're at least some of the.

Analysts numbers out there that might be a more apples to apples comparison versus the guy. We just provided which was for the first time, including several new states.

And then Ed on your question just broadly on costs going into 2023.

I think the right way to think about it as you look at the 2023 guide.

You are looking at single digits, and we're not breaking out how much of that is variable marketing versus fixed marketing.

But but.

Certainly a meaningful slowdown in cost and I've also mentioned that we're continuing to look for more and more opportunities on that front.

Thank you and appreciate all the detail that I don't think the 525 split for the new launches next year is particularly useful to give us the.

I'd like to like comparison, but just on the Q4.

<unk>.

To give us a quantification of the investment for Maryland, and Ohio, the cost shift Ray make it to give at this point, you've obviously beaten quite decent in Q3 and not much has been passed on to the full year guide in terms of EBITDA. So just trying to think about what the underlying it looks like there.

What I do is I think you can flow through the revenue decline.

And that the revenue sort of a slightly lower revenue outlook in Q4 to the Q4 EBITDA and you can basically say the rest is due to the new states.

Perfect. Thank you.

One moment for our next question.

Okay.

Our next question comes from Jason Bazinet with Citi. Your line is open.

I just had a quick question on.

I think a pretty significant share gains that <unk> had across a number of states and I was just wondering if.

If you can confirm that that's true and then b.

Is that does that sort of tethered to the lower promotional activity thats going on or would you pin that on some of the enhancements that you've made.

Thank you, yes, we did see a nice share increase to start NFL.

As well as closed all material competitive gaps.

And then secondly, the lower sort of promotion, which is a larger.

Story really.

A subset of the more rational competitive environment, we're seeing.

This year versus last year was truly night and day as far as the competitive environment and the rationality behind it.

There is still certainly some aggressive investment by some of our competitors, but nothing that was.

I think out of the ordinary and I think certainly the.

Change in that promotion environment as well as in the external marketing spend of some of the competitors helped us gain some share as well.

I'd like the ranking.

Thank you.

One moment for our next question.

Yes.

Our next question comes from Jed Kelly with Oppenheimer. Your line is open.

Hey, great. Thanks for taking my question just circling back on mobs.

Given your.

The higher hold did you see elevated churn in September and October and I think Jason you mentioned mobs grew 27% September can you give us the October growth rate and then just a follow up question just on the Amazon. Jason You mentioned strong customer engagement can you sort of speak to some of the metrics youre.

Seeing around engagement with Amazon.

Amazon Thursday night football deal. Thank you.

Sure.

I'll start on the second one so.

Really there is two things.

Ben I think the primary kind of.

The benefits of that relationship one orange is the new customers that we've acquired two is by really pushing.

Same game Parlay on Thursday night football, which is a perfect setup for the one game on so it's a great time to do that.

Seen real material movement in that mix. So those have been two real positive stories from that partnership.

And as far as months I think the key thing with mop has been that last year. If youre looking at the reasons why we broke out September because it is a little bit neither have a cleaner of a comparison.

But if you look at 2021 July had I think it was a few games of NBA <unk>.

So that drove up that July months number quite substantially substantially whereas this year NBA ended in Q2, So we didn't get any Q3 MBA.

July obviously, given the way the months' calculation is doing it.

It's one third of the calculation so that definitely was.

I think the biggest kind of story and why the Q3 <unk> growth was less than the September <unk> growth.

And then on the flip side of that the really significant growth in art mob.

Part of that was the same thing because the denominator for last year included only some players that only participated in a handful of days in July because they were primarily NBA players that didn't come back until until September for NFL.

That revenue number per player.

A numerator denominator thing looked a little bit better this year I think so.

Hard to tell given that the sports calendar changes year over year.

It's a bit of a complex thing, it's always hard to kind of tell which is why we don't guide to mops.

It's a nice kpis and a good measure of the health of the business, but yet into things like predicting the NBA playoffs going to go into July when you start thinking about guiding to mops.

<unk>. So we've just sort of stayed away from it because.

It's a little volatile given the sports calendar changes.

Got it but churn has sort of been in line with.

We thought it would be given the.

Above average oleds.

Yes, I mean, I think that when you know.

We look at churn we look at it on a player by player basis. So.

There's certainly been some optimizations, we've made our year over year to pare back bonus hunters.

And other sorts of things that I think is good churn, but as far as the underlying health of the cohorts. We're seeing the same thing that we've seen in previous quarters.

To see no real impact from anything micro like higher hold nor.

In terms of churn.

Nor are we seeing any impact from the macroeconomic environment either so we keep continue to keep an eye on that that's something we monitor very closely but the cohorts from all respects look very healthy to us.

Thank you.

One moment for our next question.

Our next question comes from Carlo Santarelli with Deutsche Bank. Your line is open.

Okay.

Hey, guys. Thank you.

Just back on that point.

Clinton Park, you mentioned earlier.

The <unk> <unk> unfavorable loss kind of led to some some tactical reinvestment in the <unk> or that Youre programming for the <unk> I am assuming most of that was in October but as you think about.

Your experience to date with players whose accounts have basically gone to zero what is the retention looks like online customer once they've already kind of gone through their funding.

Yes.

It's a good question I think thats, probably a little granular for what we'd like to cover on an earnings call, but what I will say is that.

We have quite a few model base trigger campaign set up to try to.

Reach players before their balances go down to zero.

I think that also.

Reinvestment and you noted that's part of why Youre seeing the Q3 to Q4 excuse me Q4 into Q3 revenue shift we actually last quarter you did it the other way around but then given the outcomes came in we flipped at this time.

That is a result of us trying to make sure that our players are staying active that when there are negative sport outcomes were.

Giving them good promotions to get them to reactivate.

There is an overall sort of amount of return to player that we are still I mean.

It's the ultimate question, but.

Every day, we get a little smarter and understanding what that should look like to maximize long term lifetime value. So that's really how we look at it is theres a number of different levers between some that are uncontrollable export outcome. Some that are controllable like promotional intensity and theres, probably an optimal total return to player that.

It needs to be reached and it's probably different for different segments of players and we're constantly trying to optimize that equation.

Great. Thank you and then if I could just one follow up as it pertains to the balance sheet.

Net cash used in the period was about $132 million.

You guys spent I think somewhere in kind of software costs et cetera.

$2 million or so in the period and at the $264 million EBITDA loss of $150 million gap us it looks like a source of cash could you kind of bridge that for me is that something.

But this one in there.

Yes, Carlos so basically the major part of the bridge, it's a working capital source of cash in Q3. So if you recall back in Q1 Q2.

Uses of cash in Q3, as a source of cash and I would just comment that on a full year basis, we don't I don't anticipate working capital being a meaningful source or use of cash.

With businesses of our type.

Great. Thanks, guys I appreciate it thank you.

One moment for our next question.

Our next.

Comes from Michael Graham with Canaccord.

Ken Accord Genuity your line is open.

Okay. Thanks.

First question is just you mentioned the national advertising mix and I, just wonder if you could.

Give us an update on where you are in the arc of transforming that mix and what do you expect kind of the terminal mix between national and local and then I just wanted to ask Jason about how youre thinking about the probability I guess that the U S economy into a recession next year, how would you expect that to impact your business.

How is it affecting your planning.

Yes. Good question so on the first one.

We've over the last few years said that as well.

We get to north of around 35% of the population, having legal online sports betting.

That would be a turning point, where national advertising would start to become in many cases more efficient.

In local advertising.

Just crossing that threshold now we are in states that represent about 37% of population. So just starting to see some small impacts in favorability from that.

As I think we noted on the call we had caps that were 10% better than we expected and we actually beat our total forecast for new customers acquired so we were able to get scale and efficiency and I think part of that is starting to get a little bit of benefit from this national advertising shift that should only continue to increase we have states right now that.

<unk>, 8% of the population that are in the next five months or so projected to launch the ones that we mentioned, Maryland, Ohio and Massachusetts.

Pending licensure and regulatory approvals of course.

That will really start to add additional tailwind and then it really just continues to go from there because.

And then I'm sorry, what was the second question.

Just how youre thinking about it that session a possible recession, yes, so we definitely looked at different scenarios, where.

If there were some kind of recession and if it were impactful to consumer behavior of our segment of customers that.

What could that look like what would that mean for revenue next year, what would that mean for how we have to manage costs.

We are well prepared for that and right now we're not seeing any sign of that so we're managing to the environment that we're seeing but we are prepared to shift pretty quickly. If we do start to see anything that concerns us and Fortunately right now, we're not seeing that but always good to be prepared.

Thank you.

Number four our next question.

Okay.

Our next question comes from Bernie Mcternan with Needham Your line is open.

Great. Thank you for taking the questions.

Since you last struck the partnership deal with ESPN, even though it's just a short time ago. The landscape of the U S. Sports betting has changed a lot so thinking about key priorities with any media partnership now as we sit here versus versus a couple of years ago are there any major changes that you would say you would look for now that maybe werent a key priority of couple of years ago.

I think with any anything we're doing we're looking at it the same way, which is what is the impact of any.

Partnership we might establish on our financials over the course of the partnership and if relevant beyond and.

Does that check out against what we view as the extent of the <unk>.

<unk>, so really that that's how we evaluate everything.

So that's really how we've always looked at it nothing has changed too much there I will say that the environment has improved dramatically year over year and that some.

Some of the deals.

Really at that time, I think last year.

We had to pass on.

I think in today's environment would be more rationally priced so.

We're always keeping an eye out for opportunities, but also as I noted earlier, we have more than half of our marketing spend.

And actually for Kansas Accuse me more than two thirds of our marketing spend at.

It is variable and we like to keep flexibility around being able to optimize in and out of things. So.

Always very careful before doing any partnership that we have historical data from testing on those channels and feel very good about the commitments, we're making in light of the benefits that we expect to receive great. That's really helpful. And then as a follow up you spoke about the same profitability framework for <unk> 'twenty, three irrespective of California path.

<unk> now that it doesn't seem like California's going to pass and Youre not going to have those customer acquisition cost in the quarter are those can be redeployed into anywhere else that maybe now you have the luxury of spending on that you did that there is a chance you wouldn't have prior.

That's a great question and the answer is yes. So we had a California plan in a non California plan, obviously anything can happen if we all wake up on Tuesday.

Wednesday, I guess and find out it passed in.

Great question, and I think really what we have continuously said is that we are absolutely committed to controlling our own destiny that we have a clear path to profitability with a question on the cash balance that we have today and that was irrespective of whether California launched or not and so.

We had two different plans one with an wasn't without California right now we're planning on executing that without finfet looks like where it's going but we're ready to pivot on a dime, if we get a pleasant surprise, although that's certainly not what I'm expecting next week.

Okay. Thanks, Jason.

One moment for our next question.

Our next question comes from Ryan <unk> with Craig Hallum. Your line is open.

Good morning, guys.

Two questions for US first one curious parlays, the big focus obviously for everybody and you guys, but what about in game betting.

How has that trended as a percent of sales last few quarters, and then expectations going forward.

So in game betting is definitely also an area of focus we've seen.

Since we've launched continued improvement.

Our mix of live betting.

One of the really interesting things about the early wind promo that we ran this year is that part of the design behind it.

You are paying out in game and can we use that.

Then merchandise and drive more live betting and we've seen really good.

I think impact from when we've had those early payouts on driving up live betting. So definitely continues to be a focus I know, we've talked about parlay a lot but.

And that's just because we felt like that was where the biggest gap was competitively on the <unk> side and why we are holding below.

No.

At least <unk>, so I think that thats.

And then.

Just as I think about you're asking relative to <unk>. It seems like you guys are a bit more aggressive.

Please speaking.

You mentioned early win and some of those other creative promotions and reinvestment and some temporary short term on lucky players et cetera outcomes, but a little bit less on the national advertising. How do you think about balancing new player bonuses versus existing player retention loyalty versus national and kind of brand building marketing.

<unk>.

Yes.

A very important question and it's one of those along with the.

The kind of return to player question then.

I mentioned earlier, that's really important for us to continue to optimize what's the right balance of if you think of all of it is sort of this broad category of marketing.

What's the right balance of advertising spend versus promotional spend and I think we're still along our journey of figuring that out but definitely get smarter every day and I think this year, we were able to improve how we've optimized against both such that the overall rate of promotion was lower for us this year our advertising <unk>.

Ben.

On a per customer basis.

I should say has improved we mentioned 10% better than expected in Q3 this year.

And we've been able to do all that while still hitting or exceeding our new customer targets. So far.

I feel like we've made great progress there, but there's still a lot of work to be done to figure out the right balance of where those investments are made.

Thank you one moment for our next question.

Our next question comes from Joe Stauff with Susquehanna. Your line is open.

Thanks, Good morning.

First question I, just wanted to maybe to follow up on on kind of users.

I think you said for the full year, Jason Park there.

The relationship between Mumps and monetization.

It'd be more monetization, but I was wondering.

To what degree I mean, obviously in the third quarter.

22%.

Up growth and significant monetization just wondering if you can.

Okay, tighten up sort of expectations.

In terms of that relationship in the fourth quarter and really how you think about it based on your 2023 guide.

Yes, so great question I think some of it is controllable most of it is not.

A big reason why.

You saw us substantially more art marked an mob growth in this quarter in Q3, I should say with that yet MBA bleed into July last year and this year you didn't so that obviously drove the denominator up last year drove it down this year, but then in turn also increased the art map. So.

I think some of that is sort of just spore calendar dependent.

For us we're trying to maximize total long term player LTV, regardless of how form that comes in so we don't really look at it as one is better than the other its more how do we maximize the LTV that were generating from the players that we acquire.

So thats really what guides us.

I think in the short term, we look at maximizing revenue, but also.

Making sure that we're not doing that at the expense of future revenue either so.

We look at it more holistically and I think those kpis are more just a measure for us to understand on underlying what's going on in the business.

Makes sense and then as a follow up I was wondering what your expectations were for World Cup relative to your <unk> Guide.

Yes.

Cup will be interesting we havent.

Really talk too much about it we're not breaking it out separately as we don't with any other sports.

So it will be interesting to see what kind of engagement, we get and I think that's probably one of the examples of something that if it significantly.

<unk> outperformed our expectations could be a positive catalyst for the quarter, but we don't have a ton of data on World Cup.

So it's really tough to say what to expect from him and certainly Joe not a lot of data of World Cup in Q4, yeah.

It's a big day.

Can I just squeeze a last one in just in terms of your DFS is.

How did DFS I guess performance third quarter or is it kind of still like low single digit type grower.

Yes, that's about right.

POS continues to be a slow grower for us, but one that's very important because in addition to providing.

Revenue that flows through at a very high margin. It also is really a huge source of of.

New customers for US every time, we enter a new state for OSB or I gaming.

Thanks, guys.

One moment for our next question.

Our last question comes from Jordan Bender with JMP Securities. Your line is open.

Great. Thanks for taking my question on.

On the gaming side can you talk about the pace of new content coming onto your platform and then maybe any improvements you've made on that end.

A separate jackpot pool.

Which then once it hits gets paid out usually at very high some so.

Really appealing interesting attractive product that I think.

They had a lot of what players are looking forward to the opportunity to put a small amount of money to work and potentially get a big payday.

So very excited about that that's the most significant thing we've launched throughout the year, though we've been launching tons of new content.

The games, some of which are homegrown and unique some of which are being third party integrations, but always looking to build out the content.

And make sure that we have.

The best and most popular titles out there, but also unique and differentiated offerings like our rocket game or like this jackpot functionality that we just recently launched.

Great. Thanks, Jason.

Thank you.

I would like to turn the call back over to Jason Robins CEO for any closing remarks.

Thank you for all joining us today on the call. We had an excellent third quarter really excited about performance there and we feel we're really well positioned very very strong finish to 2022, and really well set up for 2023 going into 2024, which we expect to be roughly breakeven potentially of our firm.

For a profitable year, and then of course Q4 of 2000.

2023, which we expect to be our first quarter of positive adjusted EBITDA. So very excited about the future only one year, where we think from our first positive adjusted EBITDA quarter.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Q3 2022 DraftKings Inc Earnings Call

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