Q2 2023 DraftKings Inc Earnings Call
[music].
Good day and thank you for standing by welcome to the Draft Kings Q2, 2023 earnings Conference call.
Speaker 1: Good day and thank you for standing by. Welcome to the DraftKings Q2 2023 Earnings Conference Call. At this time all participants on a listening session may disconnect.
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After the speaker's presentation, there will be a question and answer session.
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Speaker 1: Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Mr. Stanton Dodge, Chief Legal Officer. Sir, please go ahead.
Please be advised that today's conference is being recorded.
I'd like to hand, the conference over to your Speaker today, Mr. Stanton Dodge Chief Legal officer, Sir. Please go ahead.
Good morning, everyone and thanks for joining us today.
Speaker 2: Certain statements we make during this call may constitute forward-looking statements that are subject to risks, uncertainties, and other factors, as discussed further in our SEC filings, that could cause our actual results to differ materially from our historical results or from our forecasts. We assume no responsibility to update forward-looking statements other than as required by law. During this call, management will also discuss certain non-GAAP financial issues and other factors that may be related to the financial situation.
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 forecast, 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 drought King's operating performance. These measures should not be considered in isolation or as a substitute for drafting financial results prepared in accordance with GAAP reckon.
Speaker 2: that we believe may be useful in evaluating DraftKings operating performance. These measures should not be considered in isolation or as a substitute for DraftKings financial results prepared in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings presentation.
Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings presentation.
Speaker 2: which can be found on our website and in our quarterly report on Form 10Q filed with the SEC. Hosting the call today, we have Jason Robbins, co-founder and Chief Executive Officer of DraftKings, who will share some opening remarks and an update on our business. Jason Park, Chief Financial Officer of DraftKings.
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 and Chief Executive Officer, Droppings, who will share some opening remarks, and an update on our business adjacent Park Chief Financial Officer Draft Kings, who will provide a review of our firm.
Speaker 2: We'll provide a review of our financials, and we will then open the line to questions. I'll now turn the call over to Jason Roth.
And we will then open the lines for questions I'll now turn the call over to Jason Robins.
Good morning. Thank you all for joining I'm excited to be with you today and talk about our outstanding second quarter and significantly improved outlook for fiscal year 2023.
Speaker 3: Good morning, thank you all for joining. I'm excited to be with you today to talk about our outstanding second quarter and significantly improved outlook for fiscal year 2020.
Revenue and adjusted EBITDA exceeded expectations in the second quarter and importantly, we generated significant positive adjusted EBITDA second.
Speaker 3: Reving you into adjusted either to exceeded expectations in the second quarter. And importantly, we generated significant positive adjustments.
Speaker 3: Second quarter revenue increased 88% year over year to $875 million.
Second quarter revenue increased 88% year over year to $875 million.
Our revenue growth trajectory has been very strong due to our continued focus on enhancing our product and improving our customer experience, which is driving excellent retention and rapidly improving monetization at.
Speaker 3: A revenue growth trajectory has been very strong due to our continued focus on enhancing our product and improving our customer experience, which is driving excellent retention and reps.
At the same time, we were.
Speaker 3: At the same time, we remain relentlessly focused on efficiency. And our mantra of revenue growth and cost efficiency is now a core ten of yours.
Remained relentlessly focused on efficiency and our mantra of revenue growth and cost efficiency is now a core tenant of the organization.
Speaker 3: As a result of our strong revenue growth and ongoing efforts to capture efficiency.
As a result of our strong revenue growth and ongoing efforts to capture efficiencies, we delivered $73 million of positive adjusted EBITDA in the second quarter.
Speaker 3: We delivered $73 million of positive adjusted EBITDA in the second half of the year.
We are increasing our full year revenue guidance to a range of $3 $46 billion to three.
Speaker 3: We are increasing our full year revenue guidance to a range of $3.46 billion to $3.54 billion, implying growth of 56% year over year.
354 billion.
Implying growth of 56% year over year at the midpoint of our fiscal year 2023 revenue guidance includes our expectation of nearly $1 $2 billion of revenue in the fourth quarter of 2023.
Speaker 3: Our fiscal year 2023 revenue guidance includes our expectation of nearly 1.2 billion dollars of revenue in the fourth quarter of 20.
We are also improving our full year adjusted EBITDA guidance to a range of negative 199, and negative $220 million an improvement of 35% at the midpoint versus our may full year guidance.
Speaker 3: We are also improving our full year adjusted EBITDA guidance to a range of negative $190 million.
Speaker 3: an improvement of 35% at the midpoint versus our May full year.
Speaker 3: Our fiscal year 2023 adjusted EBITDA guidance includes our expectation of $150 million to $175 million of adjusted EBITDA in the fourth quarter.
Fiscal year 2023, adjusted EBITDA guidance includes our expectation of $150 million to $175 million and adjusted EBITDA in the fourth quarter of this year.
Speaker 3: Turning to our OSB product. We've continued to focus on powering our own same game parlay and differentiating our live settings.
Turning to our OSB product, we have continued to focus on powering our own team gained parlays in differentiating our live betting content.
Speaker 3: We now have live same-game parlays built in-house for most of the major sports, including NFL, NBA, MLB, college football, and college basketball, and added to our live markets for golf, tennis, and MI.
Now have lifetime game parlay itself in house or most of the major sports, including NFL NBA MLB College football and college basketball and added to our live markets for golf tennis and MLP.
Speaker 3: We are improving our product at very fast velocity with very high quality.
We're improving our product at a very fast velocity with very high quality.
Speaker 3: In iGaming, we're executing our two-brand strategy while focusing on differentiating through more in-house content, including Live Dealer and Jackpot.
And I gaming or executing our two brand strategy, while focusing on differentiating through more in house content, including live dealer and jackpot offerings. Our persistent focus on product differentiation is already apparent in share trends in the states, where we're currently lives we achieved OSB handle share of 35% and OSB GTR share.
Speaker 3: Our persistent focus on product differentiation is already apparent in SharePoint.
Speaker 3: In the states where we are currently live, we achieved OSB handle share of 35% and OSB GDPR share of 32% in the quarter, which were the highest they have been since the COVID impacted second quarter of.
At 32% in the quarter, which are the highest they have been the COVID-19 impacted second quarter of 2020.
Speaker 3: We also maintain number one eye gaming GGR position and set an all time record for eye gaming GGR share at 27.
We also maintain number one I gaming GTR position and set an all time record for I gaming GTR share at 27%.
Looking ahead, we are very excited for football season, our entire organization has dialed in and ready for startup NFL and NCAA football I.
Speaker 3: Looking ahead, we are very excited for football season. Our entire organization is dialed in and ready for the start of NFL and NCAA football. I am proud of the team that I am proud of the team that I am proud of the team that
I am proud of the team and the culture, we have put in place in particular I am proud of our team for their relentless focus on efficiency and expense management over the past 12 months, our work of achieving and is not done and we feel great about the trajectory of the business with that I will turn it over to Jason Park.
Speaker 3: In particular, I am proud of our team for their relentless focus on efficiency and expense management over the past 12 months. Our work of achieving ends is not done, and we feel great about the trajectory of the business. With that, I will...
Thank you Jason I'll hit on the highlights, including our Q2 performance and our improved 2023 guidance. Please note that all income statement measures discussed except for revenue are on a non-GAAP adjusted EBITDA basis.
Speaker 4: Thank you, Jason. I'll hit on the highlights, including our Q2 performance and our improved 2023 guidance. Please note that all income statement measures discussed, except for revenue, are on a non-GAAP adjusted EBITDA basis.
Speaker 4: As Jason mentioned, the organization is executing very well and not is showing up in our results. We achieved $875 million of revenue in the quarter, which is 88% higher than our second quarter 2022 revenue. And our adjusted EBITDA of positive $73 million significantly outperformed our expectations and improved by nearly $200 million on the year-over-year base.
Jason mentioned the organization is executing very well and that is showing up in our results. We achieved $875 million of revenue in the quarter, which is 88% higher than our second quarter 2022 revenue and our adjusted EBITDA of positive $73 million significantly outperformed our expectations and improved by nearly 200 million.
On a year over year basis.
Customer retention and engagement outperformed expectations as we successfully transition customers from the NBA season into MLP, we've seen significantly better than expected engagement on MLB due to our enhanced product.
Speaker 4: Customer retention and engagement outperformed expectations as we successfully transition customers from the MBA using into MLB. We have seen significantly better than expected engagement on MLB due to our enhanced crop.
Structural heart was also above expectations at approximately 9% for the quarter, while promotional intensity improved together supporting a more than 550 basis point year over year improvement in our adjusted gross.
Speaker 4: Structural hold was also above expectations at approximately 9% to the quarter, while promotional intensity improved together, supporting a more than 550 basis point year-to-year improvement in our adjusted gross margin rate to 47%.
Margin rate to 47%.
Speaker 4: Fixed expenses were slightly better than expected as we managed vendor related costs and exerted discipline on our compensation.
Fixed expenses were slightly better than expected as we manage vendor related costs and exerted discipline on our compensation expense we.
Speaker 4: We were particularly pleased with our votes and our more mature online sportsbook and argue.
We were particularly pleased with the results in our more mature online sports book an argument.
Speaker 4: In our states that launched from 2018 through 2021, combined handle growth accelerated quarter over quarter and increased more than 35% compared to the same period in 2022. In these states, revenue increased more than 70% year over year, adjusted gross margin rate increased more than 800 basis points, and external marketing declined more than 10%, while total unique customers increased approximately 25.
In our states that launch from 2018 through 2021, combined handle growth accelerated quarter over quarter and increased more than 35% compared to the same period in 2022, and these states revenue increased more than 70% year over year adjusted gross margin rate increased more than 800 basis points and external.
Marketing declined more than 10%, while total unique customers increased approximately 25%.
Yes.
Speaker 4: These strong results and our visibility into continued improvement have enabled us to raise our full year 2023 revenue guidance range to 3.46 billion to 3.54 billion from 3.135 billion to 3.235 billion or by $315 million at the mid-
These strong results and our visibility into continued improvement have enabled us to raise our full year 2023 revenue guidance range to $3 $4 6 billion to $3 five 4 billion from $3 135 billion to three to three 5 billion or by $315 million at the midpoint.
Speaker 4: We are also improving our full year 2023 adjusted EBITDA guidance range to negative 190Million to negative 220Million from negative 290Million to negative 340Million or by 110Million at the mid-
We are also improving our full year 2023, adjusted EBITDA guidance range to negative $190 million to negative $220 million from negative $290 million to negative $340 million or by $110 million at the midpoint.
Speaker 4: The bridge from our May full year 2023 guidance to our current full year 2023 guidance includes increasing due to stronger customer retention acquisition and engagement, structural sports book hold improvement and favorable sport outcomes in the second quarter. These items are partially offset by Kentucky now launching this year and being included in our forecast and Ohio's tax rate increasing affected July per
A bridge from our May full year 2023 guidance to our current full year 2023 guidance includes increases due to stronger customer retention and acquisition of engagement structural sports book hoard improvement and favorable sport outcomes in the second quarter. These items are partially offset by Kentucky now launching this year and being included in our forecast and <unk>.
Tax rate increases effective July one.
Customer retention acquisition and engagement are exceeding expectations and account for $225 million of the revenue improvement and $100 million of the adjusted EBITDA improvement.
Speaker 4: Customer retention, acquisition, and engagement are exceeding expectations and account for $225 million of the revenue improvement and $100 million of the adjusted EBITDA.
Speaker 4: Our structural sportsbook hold percentage forecasts is also higher, supported by our instruction of in-house scene game parlay capabilities and new live betting.
Our structural sports book hold percentage forecast is also higher supported by our introduction of in house being gained parlay capabilities and new life 30 markets. This trend accounts for $40 million of the revenue improvement and $30 million of the adjusted EBITDA improvement.
Speaker 4: This trend accounts for 40 million of their revenue improvement and 30 million of the adjusted EBITDA.
Speaker 4: Favorable sport outcomes in the second quarter contribute $30 million to the revenue improvement and $20 million to the adjusted EBITDA.
<unk> sport outcome in the second quarter contributing $30 million to the revenue improvement and $20 million to be adjusted EBITA improvement.
Speaker 4: We are very excited that Kentucky's Horse Racing Commission recently set a target launch date of September 28, 2023 for online sports betting, which is sooner than we previously anticipated. As a result, we expect $20 million of additional revenue in 2023 and a headwind of $30 million to 2023 adjustment even.
We are very excited that Kentucky Horse Racing Commission recently set a target launch date of September 28, 2023 for online sports betting, which is sooner than we previously anticipated as a result, we expect $20 million of additional revenue in 2023, and a headwind of $30 million to 2023 adjusted EBITDA.
Speaker 4: Last, we expect Ohio's increased tax rate from 10% to 20%, which went into effect July 1st, to result in $10 million of additional costs.
Last we expect our highest increased tax rate from 10% to 20%, which went into effect July one to result in $10 million of additional cost this year.
In terms of our full year 2023, adjusted gross margin percentage, we now expect to be in the 43% to 45% range an improvement from our previous guidance of 42% to 45%.
Speaker 4: In terms of our full year 2023 adjusted gross margin percentage, we now expect to be in the 43 to 45 percent range an improvement from our previous guidance of 42 to 45.
Speaker 4: We expect contribution profit, which we define as adjusted gross profit, less external marketing to grow to approximately $700 million in fiscal year 2023, which includes our investment into.
We expect contribution profit, which we define as adjusted gross profit less external marketing to grow to approximately $700 million in fiscal year 2023, which includes our investment into Kentucky.
Speaker 4: With regard to our balance sheet, we ended the second quarter with 1.1 billion cash and now planned to end the year with more than 1 billion. As a reminder, we expect approximately $120 million of capital expenditures and capitalized software development cost for fiscal year 2023 and change in network and capital to be slightly positive for the year.
With regard to our balance sheet. We ended the second quarter with $1 1 billion of cash and now plan to end the year with more than $1 billion. As a reminder, we expect approximately $120 million of capital expenditures and capitalized software development costs for fiscal year 2023, and change in net working capital to be slightly positive for the year.
In sum, we had a strong second quarter and are very excited for the upcoming football season that concludes our remarks, we will now open the line for questions.
Speaker 4: In sum, we had a strong second quarter and are very excited for the upcoming football season. That concludes our remarks. We will now open the line for questions.
Speaker 1: Thank you. As a reminder to ask a question, please press Star 11 on your phone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Stand by as you compile the Q&A roster. You
Thank you.
As a reminder to ask a question. Please press star one on your phone and wait for your name to be announced to withdraw. Your question. Please press star one again standby as we compile the Q&A roster.
One moment please for our first question.
Our first question will come from Shaun Kelley of Bank of America. Your line is open.
Speaker 1: Our first question will come from Sean Kelly of Bank of America. Your line is open.
Hi, Good morning, everyone and thank you for taking my questions.
Speaker 5: Hi, good morning, everyone, and thank you for taking my questions.
Jason or Jason maybe just to start off obviously dramatic market share gains and I think a lot of this comes back to just truly core product improvement. So I was wondering if you could give us just a little bit of color on what you think the big success stories have been over the last.
Speaker 5: Jason or Jason, maybe just to start off, obviously, you know, dramatic market share gains, and I think a lot of this comes back to just truly core product improvement. So I was wondering if you could give us just a little bit of color on what you think the big success stories have been over the last...
Speaker 5: you know, three, six, nine months on the product side. And then maybe to put it in quantification terms, what would it take to narrow the gap between your OSB handle share that you outlined at 35% and the OSB GGR share at 32%? And is that a realistic goal?
369 months on the product side, and then maybe to put it in quantification terms what would it take to narrow the gap between your OSB handle share that you outlined it to 35% and the OSB Jgr share at 32% is that a realistic goal.
Thank you Sean.
Speaker 3: Thank you, Sean. So, first on the question around product, it's been a lot of things. I think...
First on the question around product, it's been a lot of things.
I think it's a very complicated product and theres a lot of things that can create customer friction.
Speaker 3: It's a very complicated product and there's a lot of things that can create custom refriction if you're not careful and I think really a big focus for us over the last year and a half has been removing custom refriction throughout the journeys. So that's been a big deal. We've obviously greatly enhanced our same game parlay offering that's been a huge part of the story over the last six to eight months.
If youre not careful and I think really a big focus for us over the last year and a half has been removing customer friction throughout the journeys. So that's been a big deal.
Obviously greatly enhanced our same game parlay offering that's been a huge part of the story over the last six to eight months.
And I think our live betting options have gotten better as well I can objectively say I think <unk> two we feel we're going to have the best product in the market. So really excited about that and I think thats the big difference maker as you noted.
Speaker 3: And I think our live betting options have gotten better as well. I can objectively say, I think, you know, in H2, we feel we're going to have the best product in the market. So really excited about that. And I think that's the big difference maker, as you noted. As far as hold rate goes, you know, we're continually working to improve that. We've obviously closed the gap quite a bit between handle share and GGR share. And I have no reason to believe that we can't continue to do that.
As far as the whole rate goes we're continually working to improve that we've obviously closed the gap quite a bit between handle share in GTR share and I have no reason to believe that we can continue to do that.
Thank you very much.
Okay.
Thank you.
Speaker 1: Thank you. One moment please for our next question.
One moment. Please next question.
Our next question will come from Stephen Grambling of Morgan Stanley . Your line is open.
Speaker 1: Our next question will come from Stephen Grabling of Morgan Stanley . Your line is open.
Hey, thanks for taking the questions.
Speaker 4: Hey, thanks for taking the questions. I'm gonna change over to marketing and cost. It looks like in the back half the assumption is her, effectively, I think.
I'm going to change over to marketing and cross it looks like in the back half of the assumption is fair.
Effectively I think.
Much lower growth so it seems like youre continuing to be.
Speaker 4: Very much lower growth. So it seems like you're continuing to be focused on reducing costs. Are there still big contracts out that could be up marine negotiation or that we could be considering as we look into the second half or in the next year as we look at the guidance or beyond?
Just on reducing costs are there still big contracts out there could be up for renegotiation or that.
We could be considering as we look under the second half or into next year as we look at the guidance or beyond.
Yes, it's a good question I mean, we always are reevaluating.
Speaker 3: Yeah, it's a good question. I mean, we always are reevaluating every time we have a deal come up, whether it makes sense to continue and at what price.
Every time, we have a deal come up whether it makes sense to continue and at what price and that's a continual thing. So we're going to continue just over the course of our lifetime does the optimization there.
Speaker 3: And that's a continual thing. So we're going to continue just over the course of our lifetime to see optimization there.
Speaker 3: I think same thing across the board with marketing, with promotion. And I do think there's, you know, opportunity also if we can gain more market share to generate better top line as well. So those are really the core areas of focus for the company. I think on the corporate cost side, we really, you know, there's probably little bits here and there. We really spent so much effort on that for the last year and a half or so that, you know, I think the low-hanging fruit there has been picked.
Thing across the board with marketing and promotion.
And I do think there is opportunity also if we can gain more market share to generate better top line as well. So those are really the core areas of focus for the company I think on the corporate cost side, we really there's probably a little bit here and there. We've really spent so much effort on that for the last year and a half or so that I think the low hanging fruit there has been picked.
<unk>.
Speaker 3: But certainly the intent is to have significantly slower fixed cost growth next year. And I do think there's some room to optimize some of the levers that I'm...
But certainly the intent is to have significantly slower fixed cost growth next year and I do think theres some room to optimize some of the levers that I mentioned.
But as a quick clarification on any of the bigger kind of national marketing contracts.
Speaker 4: But as a quick clarification, are any of the bigger kind of national marketing contracts. Embedded in the guidance in terms of. Cost reductions are those still kind of outstanding.
Embedded in the guidance in terms of cost reductions are those still kind of outstanding we don't have any cost reductions embedded in the guidance from any of that.
Speaker 3: great way to come out certainly as i mentioned always look at when things come up uh... but where at this point not building any favorable negotiations into the guidance
Great. Thank you so much certainly as I mentioned always look at when things come up but we're at this point not building any favorable renegotiations into the guidance.
Makes sense. Thank you.
Thanks.
Speaker 3: And Steven, as you know, our approach to guidance in general has been we're going to bake what we know. If we have lots of things that we're working on, some of them may come through, some of them may not. So we don't kind of forecast like a probability adjusted number. We really bake what we know. And then we look at anything like you're describing as well as potentially any additional market share gains or anything else that might drive top line. We look at that as upside.
Steven as you know.
Our approach to guidance in general has been we're going to bake what we know.
We have lots of things that we're working on.
Some of them may come through some of them may not so we don't kind of forecast a probability adjusted number we really bake what we know and then we look at anything like Youre, describing as well as potentially any additional market share gains or anything else that might drive top line, we look at that as upside.
Speaker 6: I would add, Stephen, that these types of team and league deals are a much smaller percentage of our total marketing expense than some of the other operators in the industry. And as a general philosophy, we have implemented more short duration deals to give us a chance to evaluate actual performance more frequently.
I would add Stephen that these types of team and league deals are a much smaller percentage of our total marketing expense than some of the other operators in the industry.
<unk>.
As a general philosophy, we have implemented more short duration deals to give us a chance to evaluate actual performance.
More frequently.
Okay.
Thank you.
Speaker 1: Thank you. One moment please for our next question.
One moment please for our next question.
Our next question will come from David Katz of Jefferies. Your line is open.
Speaker 1: Our next question will come from David Katz of Jeffries. Your line is open.
Hi, good morning. Thanks.
Speaker 7: Hi, good morning. Thanks for taking my question. So in the comments you talked about backward-looking friction removal as a product focus. Can you just talk a bit more about how that focus looks going forward and what the to-do list is, you know, to sort of keep your product on a winning track.
Thanks for taking my question so.
And the comments you talked about backward looking friction removal as a product focus.
Just talk a bit more about how that focus looks going forward and what to do with us.
So to keep your product and on a winning track.
It's a great question I mean, I think that this is an area that there is still a lot left to do.
Speaker 3: That's a great question. I mean, I think that this is an area that there's still a lot left to do.
Speaker 3: You know, it's true of any product in the digital space that there's always going to be room to optimize your funnels and improve the experience, but particularly in regulated gaming where there's a lot of requirements that you have to follow and there's a lot of states that launch very quickly. So, you know, the focus for us has been on how do we get live and make sure that we're complying with all relevant laws and regulations.
It's true of any product in the digital space that there is always going to be room to optimize your funnel and improve the experience, but particularly in regulated gaming where theres a lot of requirements that you have to follow and Theres a lot of states. The launch very quickly. So the focus for US has been on how do we get live and make sure.
That we're complying with all relevant laws and regulations.
Speaker 3: I think as you then kind of say, okay, let's take a look at along the way. What is that done that might have created bad experiences for customers?
I think as you then kind of say, okay, let's take a look at along the way what has that done.
Have created bad experiences for customers.
Speaker 3: flags that go off that were misfires or things that were actually correct but don't really properly give the customer a path to resolving them.
Lags that go off that were misfires or things that were actually correct, but don't really properly give the customer a path to resolving them.
Speaker 3: even better explanation. I think there's so much there. And, you know, for us it's really about the customer experience. We look at the product and we say, if you're a customer, what elements of it would be frustrating? What elements of it would make you feel like I'm just going to go try somewhere else? And we try to improve that the best we can.
Even better explanation I think there is so much there.
And for US, it's really about the customer experience, we look at the product and we say if youre a customer what elements of it would be frustrating what elements of it would make you feel like I'm just going to go try somewhere else and we try to improve that the best we can obviously, making sure that we continue to follow our compliant stay compliant with all regulations.
Speaker 3: Obviously making sure that we continue to follow all compliance. It's taken compliant with all regulations and laws and every jurisdiction that we operate.
Laws in every jurisdiction that we operate.
Speaker 3: But I think there's a lot there and just will continually be because of this sort of nature of the regulated gaming industry and I think particularly now, given how many states launched now quickly, there's just a lot of low-hanging fruit still available.
A lot there and just will continually be because of the sort of nature of the regulated gaming industry and I think particularly now given how many states launched now quickly theres just a lot of low hanging fruit still available on that front.
Understood.
Speaker 7: Understood. As my follow up, I do have to ask periodically, there's a lot of discussion, and I think it's been obviously ramping up M&A. What are the boundaries and what thoughts might you be able to share in terms of what you might want for or need to keep the momentum going?
A follow up I do have to ask.
Periodically there's a lot of discussion and I think it's been obviously ramping up M&A.
What are what are the boundaries.
What thoughts might you be able to share in terms of what you might want or need.
To keep the momentum going.
Speaker 3: You know, I know there's a lot of chatter about M&A at this point.
I know theres a lot of chatter about M&A at this point, we're about I mean, we had a great quarter I'm really excited about that.
Speaker 3: We're about, I mean, we had a great quarter, we're really excited about that. But, you know, we're kind of on to this quarter. It's about to be the most important time of year season late for us.
But we're kind of on to this quarter, it's about to be the most important time of year seasonally for us we have a follow up coming up with the NFL and college football calendar MBA.
Speaker 3: We have fall coming up with the NFL in called football calendar, NBA.
Speaker 3: lots of things happening this fall. So, you know, this is the most important time of year. This is when we acquire the most customers, when we have the biggest opportunity to gain more market share, to where we generate the most revenue, we'll generate the most EBDA. I think this is so important, you know, a moment for DraftKings that we have team laser focused on executing and everybody's really dialed in. Now we have a lot of exciting stuff coming for NFL in college, football, basketball, and hockey.
Lots of things happening. This fall. So this is the most important time of year. This is when we acquire the most customers. When we had the biggest opportunity to gain more market share to where we generate the most revenue and will generate the most EBITDA I think this is so important Ah moment for draft Kings that we had the team laser focused on executing in <unk>.
Everybody is really dialed in now we have a lot of exciting stuff coming for NFL and college football and basketball and hockey and everything else and we're pretty excited.
Speaker 3: everything else and we're pretty excited about that.
Excited about that.
Speaker 3: You know, listen, there's always talk of things happening in the background and we have small teams that make sure they're aware of what's going on. But as a company, we're very, very focused on executing winning in the US.
Listen, there's always talk of things happening in the background and we have small teams that make sure they're aware of what's going on but as a company. We're very very focused on executing and winning in the U S.
Perfect. Thank you very much good luck. Thank.
Thank you.
Thank you.
Speaker 1: Thank you. Once again, one moment for our next question.
Once again, one moment for our next question.
Okay.
Speaker 1: Our next question will come from Robin Fawley of UBS. Your line is open.
Our next question will come from Robin Farley of UBS. Your line is open.
Speaker 8: Great, thanks. I wonder if you could talk a little bit about the percent of players that migrate from the OSB side to the IGaming site and how that's kind of changed from before Golden Nuggets all now.
Great. Thanks, I Wonder if you could talk a little bit about the percent of players that migrate from the OSB side to the gaming side and how thats kind of changed.
Before Golden Nugget till now.
Speaker 3: Hi Robin, thank you. So, you know, it's been pretty consistent actually around 50% in states that have both products tend to cross over.
Hi, Robyn. Thank you so it's been pretty consistent actually around 50% in states that have both products tend to crossover.
That hasn't really changed with Golden Nugget, because golden Nugget is such a smaller piece of the.
Speaker 3: you know that hasn't really changed with golden nugget because golden nugget is such a smaller piece of of the pie it's you know less than five percent of our revenue um... so that's really moved the overall needle we do see you know golden nugget is certainly more dominant casino brand so the crossover is a little bit less there uh... but you know it doesn't really move the needle on the overall business the overall business is pretty consistent in the fifty-ish percent range
Pi, it's less than 5% of our revenue.
So it hasnt really move the overall needle we do see Golden Nugget is certainly more dominant casino brands. So the crossover is a little bit less there.
But it doesn't really move the needle on the overall business. The overall business has stayed pretty consistent in the 50 ish percent range.
Speaker 8: Okay, and do you expect that to change when you talk about my reading in the next couple months to the draft King's tech tech or not necessarily it sounds like?
Okay and do you expect that to change when you talk about migrating in the next couple of months too.
Kings Tech stack or not necessarily it sounds like.
Speaker 3: I don't think so, at least not in the short term, because it's such a small piece of the revenue. But, you know, certainly we hope that that's a brand that grows and becomes bigger and bigger, and it could potentially impact long term. But I don't think we expect an immediate change when we migrate. I think if anything, the focus will be on continuing to build out the casino audience and the CRM and cross-sell multi-brand strategy within casino. But.
I don't think so at least not in the short term because it's such a small piece of the revenue, but certainly we hope that that's a brand that grows and becomes bigger and bigger and it could potentially impact long term, but I don't think we expect an immediate change when we migrate I think if anything.
The focus will be on continuing to build out that casino audience in.
CRM and cross sell our multi brand strategy within casino, but.
Speaker 3: You know as time goes on I think that we'll have to see how the brands growing and developing and if it can become more Of a you know sports brand than it is today, but I think as of now we think of it as more of a casino brand Okay great, thank you
As time goes on I think that.
We'll have to see how the brand is growing and developing and if it can become more of a sports brand than it is today, but I think gives US now we think of it as more of a casino brand.
Okay, great. Thank you.
Okay.
Thank you.
And one moment for our next question.
Yes.
Yeah.
Yes.
Speaker 1: The next question will come from Joe Stalf of SIG. Your line is open.
Our next question will come from Joe staff.
Your line is open.
Speaker 9: Thank you. Good morning guys. I was curious, I guess, just in terms of understanding maybe the speed of adoption, you know, especially looking at newer states, you know, you've reached about 7% adult.
Thank you good morning, guys.
I was curious I guess just in terms of understanding maybe the speed of adoption.
Sure.
And especially looking at newer states.
You've reached about 7% adult popular.
Speaker 9: popular penetration of the adults in the newest states and i'm wondering how you think about made it that continue in terms of uh... the level penetration that you have in some of your old estates you know called it new jersey or or whatever and then the second question i had was you know whether it be the number or the percentage of jurisdictions you operate in that are now contribution positive
Population penetration of the adults in the newest states and I'm wondering how you think about that continuum in terms of.
The level of penetration that you have in some of your oldest states colored in new Jersey or whatever.
And then the second question I had was what.
Whether it be the number or the percentage of jurisdictions you operate in that are now contribution positive.
Hello.
Speaker 10: Hello? Pardon me? Hi. Yes, we are back.
Hi.
Yes, we are back.
Speaker 11: all right um all ask questions i guess um... again i i was curious of the speed of adoption especially as we think about maybe the newest dates you've you reach about seven percent penetration there and just wondering how quickly now
Alright.
I'll ask the questions I guess.
I was curious of the speed of adoption.
Especially as we think about maybe the newest states.
You've reached about 7% penetration there and just wondering how quickly now do we think about that continuum.
Speaker 9: do we think about that continuum reaching penetration of some of your oldest states, whether it be New Jersey or so? And then the second question was really about, you know, the percentage or the number of jurisdictions that you operate in were your contribution positive now?
Reaching penetration.
Some of them some of your oldest states whether it be new Jersey yourself and then.
The second question was really about.
The percentage or the number of jurisdictions that you operate in where your contribution positive now.
Hello, we're back.
Yes.
Back again.
Yes that should be hopefully better.
Speaker 3: So you're asking about the penetration of new states being fast.
You're asking about the penetration of new states that.
I missed the last part of the question, Yes, no problem.
Speaker 9: yeah no problem you know just kind of understand the newest states right you you've reached about seven percent penetration or so uh... in the newest dates and wondering how quickly you think you know that that adoption rate uh... will get to levels in those newer states that that you have in new jersey or so
Just trying to understand the newest states you've reached about 7% penetration or so.
And the newest states and I'm wondering how quickly you think that.
That adoption rate.
We will get to levels in those newer states that you have in New Jersey yourself.
Speaker 3: You know, it's hard to say. I mean, still very new. I think we're continuing to see good acquisition and those new states. And then we're going to know a lot more in a couple months after NFL starts.
You know, it's hard to say I mean still very new I think we're continuing to see good acquisition in those new States and then we're going to know a lot more than a couple of months after NFL start.
Speaker 3: that's a really, you know, this will be the first time, for example, in Massachusetts, that there's NFL betting available online. So, you know, one would expect you'll see another wave of customer acquisition, but we'll know more how things are tracking in the next couple months and we'll certainly be able to update you on the next earnings call.
Great.
The first time for example, in Massachusetts that Theres NFL betting available online. So one would expect you'll see another wave of customer acquisition, but we will know more how things are tracking in the next couple of months and we will certainly be able to update you on the next earnings call.
Okay.
Hey, Joe.
Speaker 6: And, Joe, you know, finished our older vintage seats. We continued to see really healthy acquisition. We're obviously bringing marketing spend down in those older seats to match the level of acquisition and achieve appropriate cacks. But we haven't really found a ceiling in even our oldest, our most mature seats.
Our old older vintage, Steve we continue to see really healthy acquisition, we're obviously, bringing marketing spend down in those older state to match the level of acquisition and achieve appropriate.
But we haven't really found its julie.
Even our orders are most.
Mature state.
Interesting and.
Speaker 9: interesting and and one follow-up that could you know you are are you willing to maybe share with us maybe the percentage of jurisdictions or or the number uh... where you're contribution positive
One follow up if I could.
Or are you willing to maybe share with us maybe the percentage of jurisdictions or the number.
Where your contribution positive.
Yeah, we'll definitely be talking more about that this fall on our Q4 earnings call in that day excuse me Q3 earnings call in November .
Speaker 3: Yeah, we'll definitely be talking more about that this fall on our Q4 earnings call and at the Q3 earnings call in November and on our investor day. So I don't want to front run the team on that one, but we have lots of good. Okay, thank you guys.
Investor Day.
Okay, I don't want to front run the team on that one, but we have a process.
Okay.
Okay. Thank you guys.
Okay.
Thank you.
One moment please for our next question.
Our next question will come from Dan pilot.
Speaker 1: Our next question will come from Dan Pulitzer, a Wells Fargo. Your line is open.
Wells Fargo. Your line is open.
Speaker 3: Hey, good morning, everyone. The first one specific question, then maybe one more high level. Just in terms of the quarter, all of you said was 10%, I think adjusting for the favorable sword out comes around 9%.
Hey, good morning, everyone.
First one specific question and then maybe one more high level.
In terms of the quarter hold these that was 10% I think adjusting for the favorable sward outcomes around 9%.
Speaker 3: Can you maybe give us just some more detailed answers for parlay mix and lay count? And then in terms of how you're thinking about this over time, I think your largest competitor has called out a goal of 12%. So it feels like you're closing that gap pretty quickly. How do you think about this evolving over time and maybe any guy post or are you thinking about this year versus next year?
Can you maybe give us just some more detail there in terms of parlay in Lea County, and then in terms of how Youre thinking about this over time I think your largest competitors called out our goal of 12%. So it feels like you're closing that gap pretty quickly. How do you think about this evolving over time and maybe any guidepost for how you think about this year versus next year.
Speaker 6: Yeah, it's a great question on feeling. I think we're still trying to figure out what we think the right level and appropriate level to get to is. And...
Yes, it's a great question on feeling I think we're still trying to figure out what we think the right level an appropriate level to get to is in.
We will continue to follow the data I don't feel like we have enough yet to say that we have a long term target there other than I think there is still room to increase.
Speaker 6: We'll continue to follow the data. I don't feel like we have enough yet to say that we have a long term target there other than I think there's. Still room to increase and.
Speaker 6: we thus far have seen really no material impact to handle. So definitely room to go up.
Thus far have seen really no material impact to handle.
So definitely room to go up.
Speaker 6: And you know, parlayment is actually right on expectation for us this quarter. You know, there's definitely some upside, I think, an average leg count with the roll out of our new bed split that will be powered by our in-house SGP models. I think that will improve the leg adding experience in the UI, and that should hopefully increase average leg counts this fall.
And partly mix was actually right on an expectation for us this quarter.
There is definitely some upside I think an average like count with the rollout of our new best split that'll be powered by our in house SGP models that will improve that.
Adding experience in the UI and that should hopefully increase average like count this fall.
Speaker 6: But, you know, as far as Q2 those, we were really at where we...
But as far as Q2 goes we're really at where we are.
One moment please.
Speakers are you able to hear us yet.
Speaker 12: Are you able to hear us? Yep, yep. Could I just squeeze in one more for my follow-up? Actually, one moment please, sir.
Can I just squeeze in one more for my follow up Anthony one moment. Please sir.
Okay.
Mr. Robbins, Mr. Parts are you able to hear us.
Okay.
Just wondering just having a technical difficulty please stay on your lines.
Speaker 1: You just want to be able to tell me the technical difficulty. Please stay on your lines.
Okay.
Okay.
And pardon me Mr. Robin Mr Park are you able to hear us.
Yes.
Okay.
Speaker 1: Mr. Robyn. Yeah, yeah. All right. Thank you. Can I just squeeze in one quick follow-up?
Mr Pollack Mr Robbins.
Yes, yes.
Okay. Thank you.
Can I just squeeze in one quick follow up.
Speaker 3: Yeah, sure. Okay, okay. Yeah, just looking out the next few years, maybe more long-term. Do you think about seasonality involving? Do you envision a scenario where you could be even the positive in all four quarters? Are you gonna always kind of have this big jump just given the starved sports season and then maybe the shoulder season?
Sure. Okay. Okay, Yeah, just looking at that for the next coming next.
In the next few years maybe.
Or maybe more long term as you think about seasonality involving do you envision a scenario, where you could be EBITDA positive in all four quarters or you're going to always kind of have this big jump just given the star sports season, and then maybe the shoulder season.
Oh, no, we definitely expect that as the business and flat towards more.
Speaker 6: Oh, no, we definitely expect that as the business flex towards more permanent profitability data. One moment, please.
Permanent profitability there.
Okay.
Yeah.
One moment please.
Okay.
Speakers will be back on in a moment.
Okay.
Sure.
Okay.
Okay.
Hey, why don't we ask you to please standby.
Speakers will be back on momentarily.
Speaker 12: Hello? Yes, you can be able to use. Blind service, I apologize. I don't know if there's a technical issue on the service providers end, but we've tried several different phones here. I apologize to those listening to call. Go ahead, please. Thanks.
Hello.
Yes.
Are you buying service.
I don't know if there is a technical issue on the service providers and but we tried several different zones here I apologize to those listening to the call.
Go ahead please.
Thanks, that's all for me.
Okay. Thank you.
Thank you.
One moment please for our next question.
Our next question will come from Carlo Santarelli of Deutsche Bank. Your line is open.
Speaker 1: Next question will come from Carlo Santerelli of Dorsche Bank. Your line is open.
Hey, guys good morning.
Speaker 13: You guys previously, I believe it was back in March of 2022, more or less articulated a longer term goal with sales and marketing representing about 10% of revenue and promotions, sorry, 10% of net revenue and promotions, about 22% of gross revenue. This is the experience over kind of...
You guys previously I believe it was back in March of 2022.
More or less articulated a longer term goal with sales and marketing representing about 10% of revenue in promotions.
Alright at 10% of net revenue in promotions about 22%.
<unk> revenue.
Given the experience over the last several quarters of reducing promotions and seeing how the customer reacted as well as the experience you've had in your vintage states taking out some of the external marketing.
Speaker 13: several quarters of, of reducing promotions, seeing how the customer reacted as well as, you know, the experience you've had in your vintage states, taking out, you know, some of the external marketing, are those.
Are those targets still kind of where youre thinking and do you believe that.
Speaker 13: It's still kind of where you're thinking and do you believe, you know, that, do you have any sense around the timeline of, of when you think you can get to those levels.
Do you have any sense around the timeline of when you think you can get to those levels.
Yes.
Because are you there.
Okay.
Speaker 1: Hello? Um, yeah, please repeat your question. Yeah. Is there a way to fix this issue? It doesn't seem to be on our end.
Hello.
Data center.
Yes, please repeat your question.
Yes.
Victor.
Issue it doesn't seem to be on our end.
Go ahead.
One moment please.
Can we joined as a participant.
Absolutely is it possible that you can.
Speaker 1: actually is it possible that you can
Speaker 1: Baby, you can call in on a different line. Let me give you a moment. I'm going to pause the call and I will, and we'll wear something else. Everyone will ask you to please stay on your lines. Will we resuming the conference short?
A beacon calling on different line, let me give me one moment ongoing too.
Paul is the call.
And we were something else everyone. We ask you to please stay on your lines will be resuming the conference shortly.
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And pardon me you do apologize Im afraid that we do have the inhibit what has happened.
Speaker 1: And in part of me, we do apologize. I'm afraid that we do have the intent that what has happened. We do have the speakers back. And one moment, Mr. Kahlo Centarelli, I'm going to place you back in so you may ask your questions. One moment please. Please.
We do have the.
Speakers back and one moment Mr. Carlo Santarelli. Please go back and you may ask your questions.
<unk> please.
Okay.
Okay.
Carlo Santarelli are you able to hear us.
Speaker 12: I could hear you. Yep. Thanks. Welcome. If you go, please repeat your questions. The management team.
I can hear you yes.
If you could please repeat your questions.
The management team there.
Yes, we're here.
Speaker 13: Hey guys, well you guys were gone. I just gave guidance for 24 to the rest of the phone. They call it
While you guys were gone I, just gave guidance for 24 to the rest of the folks on the call I Hope that's alright.
Speaker 13: Our work is done. Thank you. My question related to with some of the experiences that you've had now, reducing promotions, reducing sales and marketing. I believe back in March of 22, you guided sales and marketing kind of as a longer term target to be about 10% of revenue.
Okay.
My.
<unk> related to some of the experiences that you've had now reducing promotions, reducing sales and marketing I believe back in March of 'twenty, two you'd guided sales and marketing kind of as a longer term target to be about 10% of revenue with promotions about 22% of GTR Bay.
Speaker 13: with promotions about 22% of GGR.
Speaker 13: based on kind of your experience in working those expenses lower. You guys feel...
Based on kind of your experience in working those expenses lower.
You guys feel there's an appropriate timeline or do you feel those targets have shifted at all.
Speaker 13: there's an appropriate timeline or do you feel those targets have shifted at all?
Speaker 6: So we'll definitely talk more about this at our upcoming investor day in Q4. But I don't think that there's going to be a material change to either of those targets from what we're seeing today. But obviously over the next few months, we'll continue to do the work to prepare and we'll have more to say on that in the fall. All right. Thank you, Jason. Thanks, Carlo. Thanks, Carlo. Thank you.
So we'll definitely talk more about this at our upcoming Investor day in Q4.
But I don't think that there is.
Going to be a material change to either of those targets from what we're seeing today, but obviously over the next few months, we'll continue to do the work to prepare and we will have more to say on that.
Paul.
Alright, Thank you Jason.
Thanks Scott.
Thank you.
Please for our next question.
Okay.
Okay.
Speaker 1: Our next question will come from Bernie McTernan of Needleman Company. Your line is open.
Our next question will come from Bernie Mcternan of Needham <unk> Company. Your line is open.
Great. Thanks, Good morning, Thanks for taking the questions. Jason can you just expand some of the comments in the letter on AI should we think about the <unk> revenue generating opportunities are cost efficiencies and just any specific initiatives or products to point to that are in the works.
Speaker 14: Great, thanks. Some more in thanks for taking the questions. Jason, can you just expand some of the comments in the letter on AI? Should we think about the more as revenue-generating opportunities or cost efficiencies and just any specific initiatives or products to point to there in the works? I think it definitely.
I think it's definitely both.
Speaker 6: you know, when you can do more for less, that drives both revenue and cost efficiency. And so I think that's really the the semantics obviously depending on what it is and where.
When you can do more for less that drives both revenue and cost efficiency and so I think thats really the thematic obviously, depending on what it is and where.
Speaker 6: in the stage of development it is that will affect the relative ways that we use it. I think for example right now with our developer efficiency initiatives we're focused on how do we get more done with our development team. So I think that what that probably means is over time we don't need to add as many engineers to get the work done that we want to do as we continue to scale the business and build out the product and serve the customer.
And the stage of development. It is that will affect the relative weight that we use it I think for example.
Right now with our developer efficiency initiatives were focused on how do we get more done with our development team.
So I think that what that probably means is over time, we don't need to add as many engineers to get the work done that we didn't want to do as we continue to scale the business and build out the product and serve the customer.
Speaker 6: But I do think it's a combination if you think about it from a P&L standpoint of both cost opportunity and revenue opportunity. None of that is baked into any of our guidance or any of the things we share in the past to invest today. This is something that we really view as upside and it's in the category of the long list of things that we're working on that we think could create even better long-term economics for a shareholder.
But I do think it's a combination if you think about it from a P&L standpoint, if a cost opportunity and revenue opportunity. None of that is baked into any of our guidance is there any of the things we've shared in the past at Investor Day. This is something that we really view it at that.
Syed.
It's in the category.
The long list of things that we're working on that we think could create even better long term economics for our shareholders.
Speaker 14: Is it helping some of the product roadmap that's coming out for this current NFL season or is that too early? And it's more of a 24, 25 event. You know, I-
Is it helping some of the product roadmap that that's coming out for this current NFL season or is that too early and it's more of a 'twenty four 'twenty five event.
I think the the.
There'll be some impacts we've been working on machine learning.
Speaker 6: There will be some impacts. We've been working on machine learning for a long time and based level AI. I think somebody advances in what third party tools are out there and available of really hitting an inflection point.
For a long time and <unk>.
Base level AI, I think somebody advantage and what third party tools are out there and available and really hitting an inflection point in the last months.
Speaker 6: in the last month. And I think that's where really the opportunity lies to take it to the next level. But there's things we've been working on in and around the space for years. So there will be some impact.
And I think Thats, where really the opportunity lies to take it to the next level, but there's things we've been working on in and around this space for years. So there will be some impact.
Speaker 6: of the machine learning and AI work in this coming season. But I think some of the really big, more like, you know, things that can kind of fundamentally change the outlook of the business, those are still on the con. Great. Thanks for taking your questions.
The machine learning and AI work in this coming season.
I think some of the really big.
More like.
Things that can kind of fundamentally changed the outlook of the business those are still on the comp.
Great. Thanks for taking my questions.
Thank you.
One moment please for our next question.
Our next question will come from the line of Jed Kelly of Oppenheimer. Your line is open.
Speaker 1: Next question will come from the line of Get Kelly of Oppenheimer. Your line is open.
Speaker 15: Hey, great. Thanks for taking my question. Two, if I may, are you now just seeing structurally lower cacks just on getting better amortization from your brand spend? And then can you speak to, I know that the product enhancements, but what is keeping players more engaged outside of football? Some of the merchandising you're doing on the front page or products just can you talk about the engagement trends you're seeing. Thank you.
Hey, great. Thanks, Thanks for taking my question.
Two if I may are you now just seeing structurally lower capex just on getting better amortization from your brand spend.
And then can you speak to I know that the product in hand, and enhancements, but what is keeping players more engaged outside of football at some of the.
Merchandising youre doing on the front page or or products. Just keep just can you talk about the engagement trends you're seeing thank you.
Yes, so great question I think on the CAC side, it's a combination of several things one certainly what you are mentioning that national scale the brand it.
Speaker 6: Yes, it's a great question. I think on the CAC side, it's a combination of several things. One, certainly what you're mentioning, this national scale of the brand.
Speaker 6: We built and the leverage we're getting at it at. It's also, you know, this is another area of the business that's constantly being analyzed and optimized. We have a team of analytics people, we have machine learning, and now we're actually starting to implement AI as a means of helping with things like bidding on PPC platforms or creation of, you know, multiple, you know, many multiples more of different types of creative that you can test and optimize in the market. So, you know, that's just a continual thing that we've been doing and I think is going to continue and potentially could be even with some of the AI work that we're exploring, you know, in for another sort of step function improvement. But it is what you're saying to absolutely. I think that there's sort of an underlying advantage that we have in that we have a brand, we have national scale. But then we also have a team that's really been honing and optimizing the marketing engine.
We felt and the leverage we're getting out of that it's also.
Another area of the business, it's constantly being analyzed and optimized we have a team of analytic people. We have machine learning and now we're actually starting to implement AI as a means of helping with things like bidding on PBC platforms. Our creation multiple many multiples more of different types of creative that you can test and optimizing.
In the market.
That's just a continual thing that we've been doing and I think is going to continue and potentially it could be.
Some of the AI work that we're exploring and for another sort of step function improvement.
But it is what you are saying two absolutely I think that there's sort of an underlying advantage that we have and that we have a brand we have national scale. But then we also have a team thats really been honing in optimizing the marketing engine unit. It's a complicated thing right. I mean this is very not straightforward analysis, we're at any given point in time.
Speaker 6: It's a complicated thing, right? I mean, this is very, you know, not straightforward analysis. We're at any given point in time during our peak season.
Our peak season spending in so many different places with so many different partners.
Speaker 6: spending in so many different places with so many different partners, so many different creatives in market. So it's really just the opportunity to just continually optimize an engine like that I think should be a continual tailwind for us for many years to come.
So many different creatives and market. So it's really just the opportunity to just continually optimize an engine like that I think should be a continual tailwind for us for many years to come.
And then on player engagement.
Speaker 6: like, oh, right. All right. So, you know, I think the big difference this year was the way that we were able to continue to retain NFL players into NBA season. And that's continued into baseball season as well. Those have both exceeded our expectations.
Oh right right. So.
The Big difference. This year was the way that we are able to continue to retain NFL players into NBA season.
And that's continued into baseball season as well those are both exceeded our expectations. We also have seen excellent cross sell into other game in a robin was asking about that earlier that's continued as we it.
Speaker 6: We also have seen excellent cross-cell into iGaming. Robin was asking about that earlier. That's continued as we've, you know, it's kind of like this halo effect of when you retain better and cross more people into NBA on the sports side, that then has some spillover effect on iGaming because more active players on the OSP platform cross-sell more into more active players on the iGaming platform.
Kind of like this halo effect of when you retain better and cross more people into MBA on the sports side that Dan had some spillover effect, then I gaming because more active players on the OSB platform cross sell more into into more active players on the gaming products.
Speaker 6: So that's really, I think, what I would attribute Q2. If you look at past years, we've typically seen revenue decline, Q2 to Q1. We weren't expecting this. I mean, this was the result of a huge market share gain year over year. Lots of really just metrics that for last year and a half we've been testing and really just hit a great point where the optimization is really kicking in.
Products. So that's really I think what I would attribute Q2, if you look at past years, we've typically seen revenue decline Q2 to Q1.
Werent expecting this I mean this was a result of a huge market share gain year over year lots of really just metric that for last year and a half we've been testing and really just hit a great point, where the optimization is really kicking in.
Speaker 6: And just the culmination of a ton of great product work. I mean, the product is so much better year over year from where it was last year. And as I said earlier, I feel like in the back half of the year, we're going to have best product in the market.
And just the culmination of a ton of great product work I mean, the product is so much better year over year from where it was last year and as I said earlier I feel like in the back half of the year, we are going to have the best product in the market.
Speaker 3: Yeah, I think all the work we do in that, sports is sport retention or sport to sport cross-cell. However, however you want to think about it, you got to cross-cell them, but most importantly, the products got to be great. When you're bringing NFL player into NBA, or an NBA player into MLB, and we're just super proud of how strong both our NBA product and MLB product improved on a year of your basis. Thank you, good quarter. Thank you.
Yes, I think thank you Ken.
I think all the work we do in that.
Port retention, our support to support cross sell however, however, you want to think about it you got to you got to cross sell them, but most importantly, the products got to be great. When youre, bringing NFL player in the NBA or an NBA player in the MLP and we're just super proud of how strong both our NDA product and it will be product improved on a year over year basis.
Thank you good quarter.
Thank you.
Thank you.
One moment please for our next question.
Yes.
Okay.
Yes.
Speaker 1: Our next question will come from Michael Graham of Ken Accord. Your line is open.
Our next question will come from Michael Graham of Canaccord. Your line is open.
Thanks, a lot and yes awesome quarter, guys I wanted to ask on the.
Speaker 13: Thanks a lot and yeah, awesome quarter guys. I wanted to ask on the on the growth outlook for the rest of the year, can you maybe deconstruct that from the perspective of the of the vintages of your states like how much of the growth you think is going to come from some of your newer states versus more established ones and related to that just maybe a layer of depth into how you layered the launch of Kentucky into your outlook for Q3.
On the growth outlook for the rest of the year can you maybe deconstruct that from the perspective of the vintages of your states like how much of the growth you think is going to come from some of your newer states versus more established ones.
Related to that just.
Maybe a layer of depth into how you layer to the launch of Kentucky into your outlook for Q3.
Absolutely so definitely the bulk of the growth is going to come from the states that we launched.
Speaker 6: Absolutely. So definitely, you know, the bulk of the growth is going to come from the states that we want.
Speaker 6: from 2018 to 21. We are starting to get some real good contribution from some of the 22 states as well, but I think the degree to which we are still seeing growth in our older state, it's just very significant and they're obviously a bigger piece of the pie, so when you can get that kind of growth in your older states, it makes it very big impact on the overall business.
From 2018 through 21, we are starting to get.
Some real good contribution from some of the 22 states as well, but I think.
The degree to which we are still seeing growth in our older state.
And so it's very significant and there are obviously a bigger piece of the pie. So when you can get that kind of growth in your older States. It makes it very very big impact on the overall business.
And then I'm sorry, what was the second part of the question, Kentucky, Kentucky, Kentucky, Kentucky, I think we've got a slide on that but we're projecting roughly.
Speaker 6: And then I'm sorry, what was the second part of the question? Kentucky. Kentucky. Kentucky. So Kentucky, I think we had a slide on this, but we're projecting roughly 20, we're expecting, I should say, $20 million of revenue and $30 million EBITDA loss.
We're expecting I should say $20 million of revenue and $30 million EBIT a lot.
Speaker 6: from Kentucky in fiscal year 23. I think that assumes the September 28th launch date. Last time when we guided, we did not actually have a clear launch date for Kentucky, and now that we do, we put it into the guidance.
From Kentucky in fiscal year 'twenty three.
And I think that that assumes at September 28 launch date.
Last time, when we guided we did not actually have a clear launch date for Kentucky and now that we do we put it in the guidance.
Speaker 6: And I'll note that despite that not being in our prior guide and now being in our current guide, we still had a massive improvement in the guide. So that shows that not only can we fund new state launches through the results that were generated in old states and the cost efficiencies we're finding, but we can do that and continue to see upside on top of that, which is a great story, I think, from years past where we've always had to kind of increase the loss outweigh every time that we've had a new state launch.
Okay.
I will note that.
Might that not being in our prior guide and now being in our current guide we still had a massive improvement in the guide so that shows that not only can we fund these.
Date launches through the results that we're generating allstate and the cost efficiencies, we're finding but we can do that and continue to see upside on top of that which is a great story I think from years past, where we always had to kind of increase the loss outlook every time that we've had a new state launch.
Excellent. Thank you.
Thank you.
Speaker 1: One moment, please, for our next question.
One moment please for our next question.
Yeah.
Speaker 1: Next question will come from brand Montour of Barplease. Your line is open.
Our next question will come from Brent Montara.
Of Barclays. Your line is open.
Hey, good morning, everybody just one for me.
Speaker 9: Hey, good morning, everybody. Just one for me. So back to the same game, Parlay, enhancements for the upcoming NFL season. Sounds like you're pretty confident chasing that product's gonna be.
Back to the <unk>.
Same game parlay enhancements for the upcoming NFL season, it sounds like you're pretty confident chasing that product is going to be.
Speaker 9: the best as you call it. I guess it sounds like you baked in higher holds for this. It sounds like you baked in higher retention.
The best.
As you call. It I guess it sounds like you've baked in higher holds for this it sounds like you've baked in higher retention and no share gains if im reading.
Speaker 9: and no share gains if I'm reading your comments correctly. I guess the question is, you know, are the pro-Ike enhancements...
Your comments correctly I guess the question is are the product enhancements differentiated enough.
Speaker 9: differentiated enough that it could be a driver of market share. Or, you know, is it the kind of thing where you would have to go out and get people to to flip from your main competitor to try it? How does the mechanics work of gaining share off something like that?
It could it could it could be.
A driver of market share.
Or is it the kind of thing, where where you would have to go out and.
And get people to flip from your main competitor to try it how does the mechanics work of gaining share off something like that.
No.
Speaker 16: You're right. It's a combination of two things. It could be actual wallets that was going to your competitors, customers that were using your competitors before, or it could simply be just better engagement and monetization of customers on your platform. And what we felt like in Q2, it was a combination of both.
Youre right. It is a combination of two things that could be.
Actual wallet.
And your competitors' customers that were using your competitors before or it could simply be just better engagement and monetization of customers on your platform.
And what we felt like in Q2, it was a combination of both.
Speaker 6: Definitely being able to increase hold rate year over year made a big difference in share. But it was a combination of both. We think we got handle share from people that were playing NBA with competitors last year as well.
Definitely being able to increase whole rate year over year made a big difference in share, but it was a combination of both we think we got handle share from.
People that were putting MDA with competitors last year as well.
Speaker 6: I think that's really a result of just the product improvement year-a-year. So to answer your question, absolutely. Could there be upside-yes?
I think thats really a result of just the product improvement year over year. So to answer your question absolutely could there be upside yes.
Speaker 6: You know, the goal for the team is to go out and beat anything that we put out there. And I think that we feel like we have quite a few initiatives that could help us gain share and could help us further retain and engage and monetize our...
The goal for the team to go out and beat anything that we put out there and I think that we feel like we have quite a few initiatives that could help us gain share and could help us further retain engage and monetize our users and in the back half of the year.
Speaker 6: in the back half of the year. We've just consistently taken approach of not putting things that we don't feel we have full line of sight to in the guide. Our guide we consider to be what we commit to. And then we go out and we try to deliver above that by executing better and hopefully some of the things that you hope come through, come through. But we don't put hope in the guide, we put what we know in the guide. Great, thanks for the comments. Congrats on the quarter.
We've just consistently taken an approach of not putting things that we don't feel we have full line of sight.
Two in the guide our guide we consider to be what we commit to.
And then we go out we try to deliver above that by executing better.
Hopefully some of the things that you hope come through come through but we don't put cope in the guide we put what we know in the guide.
Great. Thanks for the comments congrats on the quarter.
Thank you.
Thank you.
Okay and one moment please for our next question.
Yes.
Our next question will come from Stephen <unk> of TD Cowen Your line is open.
Speaker 1: Our next question will come from Stephen Diagola of Tidic, Calvin, Yolani Zophan.
Speaker 7: Thanks for the question. I mean, I've did it implied second half guidance and quarterly cadence versus your prior guide. Could you just walk us through your assumptions for the creator implied EBITDA upside to Q3 versus Q4, particularly in light of the Kentucky launch and favorable sport outcomes in Q3 last year. And also just what are the whole percentage rates you're assuming for Q3 and Q4? Thanks.
Alright, thanks for the question.
On the updated implied second half guidance and quarterly cadence versus your prior guide could you just walk us through your assumptions for the.
Great implied EBITDA upside to Q3 versus Q4.
In light of the Kentucky launch and favorable sport outcomes in Q3 last year and then also just what are the hold percentage rates youre, assuming for Q3 and Q4.
Thanks.
Speaker 16: Thank you, yeah, so we're assuming a similar hold rate to what we had in the back half of last year. I think for the Q3, Q4 question, Kentucky definitely made a little bit of a difference, but the fact that we were able to increase the guy for the back half of the year, increase the Q4.
Thank you, yes, so we're assuming a similar rate to what we had in the back half of last year.
I think for the Q3 Q4 question, Kentucky definitely made a little bit of a different.
But the fact that we were able to increase the guide for the back half of the year increased the Q4 guide I think really had to do with just the overall performance of the existing states that we're in and of the overall business on the cost efficiency side, and I think that thats more than enough to offset the Kentucky.
Speaker 6: Guide, I think really had to do with just the overall performance of the existing states that we're in and of the overall business on the cost efficiency side. And. I think that that's more than enough to offset that Kentucky. Uh, even so that we're negative even though that we're expecting to generate in the back half of the year. So we're pretty optimistic about a really great 2nd, half and.
EBITDA.
Negative EBITDA that we're expecting to generate in the back half of the year. So we're pretty optimistic about our really great second half.
Speaker 6: I think we'll have to see exactly what ends up happening with states like North Carolina and Vermont, but right now we feel like Kentucky's gonna provide a great opportunity for us.
I think we'll have to see exactly what ends up happening with states like North Carolina, and Vermont, but right now we feel like Kentucky.
I'm going to provide a great.
Opportunity for us to go and invest in acquiring customers in our existing base and there is also several new states.
Speaker 6: go and invest in acquiring customers and then our existing states. And there's also several new states that haven't had a full NFL season. Massachusetts hasn't had any NFL season, Ohio didn't launch until January last year. So there should be a lot of upside and the customer acquisition numbers and they and in each to this.
I haven't had a full NFL season, Massachusetts, Hasnt had any NFL season, Ohio didn't launch until January last year. So there should be a lot of upside and I think the customer acquisition numbers.
And each day this year.
Hey, Jason just one more if I can in light of the Ohio move to double its tax rate could you maybe just discuss the.
Speaker 7: Jason, just one more if I can. And lighted the Ohio move to double its tax rate. Could you maybe just discuss the long-term rest to your business and state governments would look to, you know, take increasing taxes on gross gaming revenue. And sort of what are the incentives that would keep state governments maintaining lower tax rates?
The long term risk to your business and state governments would look to take increase in taxes on gross gaming revenue.
What are the incentives that would keep state governments, maintaining lower tax rates.
Thank you, yes, I think it's a great question, obviously disappointing to see but I.
Speaker 6: Yeah, you know, I think it's a great question, obviously, disappointing to see, but, you know, I think most state governments understand that if you start taxing this too high, you kind of defeat the purpose because it makes it really impossible for the legal regulated operators to compete with the illegal offshore operators that are not paying or some of them on shore now. They're not paying taxes that are not following regulation.
I think most state governments understand it if you start taxing to high kind of defeat the purpose because it makes it really impossible for the legal regulated operators to compete with the illegal offshore operators that are not being all right some of them onshore now.
They are not paying taxes that are not following regulation.
Speaker 6: You know, there is, I think, great awareness of that in state legislatures.
There is I think great awareness of that and state legislatures.
Speaker 6: So, you know, I'm optimistic that states are going to keep taxes at a reasonable level. I think that they understand that they're ultimately going to drive volume back into the illegal market if they try to tax the industry too heavily. Thanks, Jason.
So im optimistic that.
States are going to keep taxes at a reasonable level I think that they understand that they are ultimately going to drive volume back into the illegal market. If they tried to attack the industry directly.
Thanks, Jason.
Thank you.
One moment please for our next question.
Our next question will come from Robert Fishman of Moffett Nathan Your line is open.
Speaker 1: Next question will come from Robert's fisherman of Mothat, Nathanson. So, the line is open. Hi, good morning, guys.
Hey, Good morning, guys two questions on partnership first ahead of the NFL kickoff can you help us understand how the Amazon Thursday night football partnership healthcare business last year, and whether there are more opportunities to build upon that success. This year and then anything you can share on how the ESPN partnership has been a <unk>.
Speaker 9: First, ahead of the NFL kickoff. Can you help us understand how...
Speaker 9: Amazon Thursday night football partnership helped your business last year and whether they're more opportunities to build upon that success this year and then anything you can share on how
Speaker 9: ESPN partnership has been a driver of your strong upgrowth or overall business.
Driver of your strong mask growth or overall business and would you be willing to expand your ESPN partnership depending on which direction Disney is according with the strategic review.
Speaker 9: And would you be willing to expand your ESPN partnership depending on which direction Disney ends up going with its strategic view?
Yes, so Amazon has been a great partner last year, we were really happy with Thursday night football results.
Speaker 16: Yeah, so Amazon has been a great partner. Last year we were really happy with Thursday night football results. It was a big driver of customer acquisition for us. Those games are also really well built for seeing game parlay offering. So really helps drive a lot of parlay mix through a better promotion of seeing game parlay on Thursday night.
The big driver of customer acquisition for US those games are also really well built for seeing game parlay offering. So really helped drive a lot of parlay mix through better promotion is being gained parlays on Thursday night, and we have a few extra things that we're going to be doing with Amazon. This year that we're pretty excited about that will be I think.
Speaker 6: And we have a few extra things that we're going to be doing on Amazon this year that I'm pretty excited about that will be I think coming to everybody.
Come in coming to everybody.
Speaker 6: do order once the season launches. So really should be a great year with Amazon and we're really just thrilled with that partnership. And as far as the SPN goes, same story, we've been really happy with them as a partner. They've been great. We continue to get great value out of that relationship. And...
And do order when the season launches, so really should be a great year with Amazon and we're really just thrilled with that partnership and as far as ESPN goes.
<unk> story, we've been really happy with them as a partner they've been great. We continue to.
Get great value out of that relationship.
Speaker 6: You know, we'll have to see. I think obviously we saw the same comments everybody else did from Bob Eiger and
We'll have to see I think.
Obviously, we saw the same comments everybody else bid from Bob Iger and.
Speaker 6: I think it's still fairly early days for them, but I don't wanna speak for them. They'll know better than I will, what their plans are, but we're always happy with great partners like ESPN, if there's a way to have a deeper relationship that makes sense for both companies and something we would certainly consider. And...
I think it's still fairly early days for them, but.
I don't want to speak for them, they will know better than I am then what their plans are but.
We're always happy with Great partners like ESPN, if theres a way to have a deeper relationship. It makes sense for both companies and something we would certainly consider an if.
Speaker 6: If it doesn't make sense and there's something that you know
It doesn't make sense and there is something that.
It doesn't really work for us or for them then we won't we're perfectly happy with the relationship as it is now so I think that's how we're thinking about it.
Speaker 6: doesn't really work for us or for them then we won't. We're perfectly happy with the release of the visited now. So I think that's how we're thinking about it. Great. Thank you, Jason.
Great. Thank you Jason.
Okay.
Thank you.
One moment please for our next question.
Our next question will come from the line of Ryan <unk> of Craig Hallum Capital Group. Your line is open.
Speaker 1: And the question will come from the line of Ryan Sikal of Craig Helen Capital Group. Your line is open.
Good morning, guys just one for US you mentioned MLP you. It's been a positive surprise there specific product that's resonating better with the player whether it be live same game, partly et cetera.
Speaker 7: Good morning guys, just one for us. You mentioned MLB has been a positive surprise. There's specific product that's resonating better with the player, whether it be live, same game parlay, etc.
Speaker 16: Yeah, I think first of all, MLB itself has made some great changes that have helped increase engagement with the sports. They give them credit for that. But, you know, I think betting has helped a lot too. And MLB, first of all, is very well built for live betting. So that's been a real product that works very well with that sport and we're excited about the offering we have there this year.
Yes, I think first of all MLP itself that made some great changes that have helped increase the engagement with the sports.
But for that.
I think betting has helped a lot.
MLB first of all it's very well bell provide betting.
So that's been a real product.
It works very well with that sport and we're excited about the offering we have there. This year also the same game parlay product has been significantly enhanced this year, we brought our own models into the fold and I think.
Speaker 16: Also, the same game parlay product has been significantly enhanced. This year we brought our own models into the fold and I think, you know, really just improved both the UI and the overall offering of same game parlay as for MLB. And there's been a number of other things we've done. We've done some work on the cash out feature. I mean, there's a lot of different areas that we've worked on that I think have really helped improve the MLB.
Really just improve both the UI and the overall offering the same game parlays, Brad and I'll be.
And theres been a number of other things we've done we've done some work on the cash out feature I mean, theres a lot of different areas that we worked on that I think has really helped improve the MLP offering year over year.
Speaker 6: offering you over a year and that combined with really strong engagement from a viewership perspective, I think is driven unexpectedly positive to the upside results for MLB season so far. Thank you, Mr. Rob, guys.
That combined with really strong engagement from a viewership perspective, I think is driven unexpectedly positive to the upside results for MLB season, so far.
Thanks, Jason Nice job guys.
Thank you.
Thank you.
One moment please for our next question.
And our next question will come from Barry Jonas of Twist. Your line is open.
Speaker 1: And our next question will come from Barry Jonas of Truth. Your line is open.
Hey, guys, you've previously given some advice on how to think about NFL results and corresponding hold.
Speaker 13: Hey guys, you've really previously given some advice on how to think about NFL results and corresponding holds. Last year, it correlated, made a little laugh with the season went on. Just curious as we head into football season, if there's anything you can give us to help think about, sort of, that week to week success.
Last year, it correlated maybe little less with the season went on just curious as we head into football season. If theres anything you can give us to help think about sort of that week to week success.
Yes, I think it's very similar to what we had shared last year that.
Speaker 16: Yeah, I think it's very similar to what we had shared last year that the results can definitely range between negative 10 and probably positive 20%.
The result can definitely ranged between negative 10, and probably positive 20%.
Speaker 6: depending on you know if you've really taken like that 95% confidence interval it can get that wide and any given week obviously over the course of several weeks over the course of the season that stand tight and it's but that's how I would think about kind of a week-to-week thing and
Depending on if you're really taken like that 95% confidence interval. It can get that wide in any given week, obviously over the course of several weeks over the course of the season that band Titans, but that's how I would think about kind of a week to week thing.
Speaker 6: You know, really it's the results generally in NFL of two things. One, you know, do the favorites, win or lose. And second is how the player props do. And that second part is becoming increasingly important as you know, the industries evolve because so much betting is now happening on player props and so much thinking in parlay, depends on player props. So that's really made a big difference.
Really it's a result generally an NFL two things one do the favorites win or lose and second is how the player props do and that second part has become increasingly important as the industry has evolved because so much betting is now happening on player props and so much name game parlay depends on player prop.
So that's really made a big difference.
Speaker 6: You know, I think given Q3 is always one day.
I think given Q3 is always one that.
Speaker 6: It's for our business planning group. It's their least favorite quarter because
For our business planning group, it but at least favorite quarter, because so much volume comes in the last three weeks of the quarter.
Speaker 6: so much volume comes in the last three weeks of the quarter and
Speaker 16: You know not that it's you know we've been going on but like relatively speaking
Not bad.
<unk>.
The only thing going on but I think relatively speaking.
Speaker 6: July and August are slower months, so it's really the last few weeks to get all of it to NFL volume in.
July and August are slower months. So it's really the last few weeks to get all of it the NFL volume in.
Speaker 6: A few good or bad weeks, and definitely between the results a little bit, but I think that as we've gotten bigger and our customer base has become more diversified, the effects of that are lower, as we've gotten more of a mix of player parlay, so it's not just straight game outcomes.
A few good or bad weeks indefinitely swing the results a little bit, but I think that as we've gotten bigger and our customer base has become more diversified the effects of that are lower as we've gotten more of a mix of player parlayed. So it's not just straight game outcome that yes. So.
Speaker 6: You know, so I think we're have to look at this season. I think this year we might see a little bit tighter bands, certainly over three weeks we will, but I think still fair, give it what we know today. I think week to week about that minus 10 to plus 20% possibility on hold, depending on the game outcomes and player part of it out.
I think.
We'll have to look at this season.
This year, we might see a little bit tighter band certainly over three weeks, we will but I think still fair given what we know today to thank week to week about.
Minus 10 to plus 20% possibility on hold depending on the game outcomes and play a part of the outcomes.
That's helpful. And then just quick follow up wanted to get your thoughts on Florida, given the recent court decision do you see a pathway for draft kings to compete in the state.
Speaker 17: That's not the only just quick help follow up wanted to get your thoughts on Florida given the recent court decision Do you see a pathway for drafting to compete in the state?
I think too early to tell what the path is.
Speaker 16: You know, I think too early to tell what the path is, but I'm optimistic there'll be a pathway there because I think people in Florida want great products. And...
<unk> optimistic there'll be a pathway there because I think people in Florida want great products and so.
Speaker 6: I do think that it'll get figured out, but right now, I think it's really hard to say there's still going to be...
I do think it will get.
Figured out but right now.
I think it's really hard to say there is still going to be.
Speaker 6: a few steps to play out and a few you know things with chord rulings and other other things so
A few steps to play out in a few things court rulings and other things so.
Speaker 6: You know, it's really at this point a little bit murky and, you know, I think we'll know a lot more in the coming months. Great. Congrats on the quarter.
It's really at this point, a little bit murky and.
I think we'll know a lot more.
In the coming months.
Great Congrats on the quarter.
Thank you.
Thank you.
And one moment for our next question.
Okay.
Our next question will come from Jordan Bender of JMP Securities. Your line is open.
Speaker 1: Our next question will come from Jordan Bender of JMP Securities. Your line is open.
Great. Thanks for taking my question. So you gave comment on where your <unk> margin could potentially go over time more of a wait and see but I'll, maybe ask just on the MGR emerging side still international markets.
Speaker 9: Great, thanks for taking my question. So you gave comments on where your GGR margin could potentially go over time, more of a wait and see, but maybe I'll just on the NGR margin side, that still lags international markets. Just given the partly myths, can we maybe exceed 10 to 12% NGR margins that we see in the international markets?
Given the partly mix can we may be exceed 10% to 12% and <unk> margins that we see in the in the international markets.
Yes.
Yeah I think at this point, we have no reason to believe that we can't get to the team sort of MGR margin that we see internationally, but obviously there is still early days, it's still early days here. So let's see how it plays out but given the fact that we've over the last couple of years continued to optimize the <unk>.
Speaker 16: You know, I think that at this point we have no reason to believe that we can't get to the same sort of NGR margins that we see internationally, but
Speaker 16: Obviously, there's still early days here. So, let's see how it plays out. But given the fact that we've over the last couple of years continued to optimize the hold rate, continued to optimize the promo mix, and we've actually seen better customer engagement, better retention.
<unk> continued to optimize the promo mix and we've actually seen better customer engagement better retention.
Speaker 6: You know, I'm pretty optimistic and have no reason to believe that we can't reach similar type of numbers that you're talking about that more mature markets across the globe have been able to.
Yes, I am pretty optimistic and have no reason to believe that we can't reach the similar type of numbers that youre talking about that more mature markets across the globe have been able to get there.
Speaker 9: Great. And then just on the follow up, you called out some states that have legalized but not launched yet. You know, a market that we don't talk about is Nevada. Is there any interest from draft king to go into that state at any 20 time? Yeah, we're done.
Great and then just on the follow up you called out some states that have legalized, but not launched yet.
Market that we don't talk about as Nevada is there any interest from draft kings to go into that.
At any point in time.
Yes, we are definitely interested I mean.
Speaker 6: You know, Nevada is obviously an important safer gaming. There's a robust sports setting market there. It is in-person registration, so...
That is obviously an important day for gaming.
Sports betting market there it is in person registration though.
Speaker 6: I would tend for any expectations for the possible contribution there, but I do think it's an important state because...
I would temper any expectations for the possible contribution there, but I do think it's an important date because.
Speaker 6: You know, people go there who are customers and they want to be able to make that. And so I think being able to give them that option as well as to be able to access the, the, the, they are now betting with, you know, others and I think would like to try drafting's product is definitely something that works for them. Great. Nice quarter. Thank you.
People go there who are our customers and they want to be able to make bets and so I think being able to give them that option as well as to be able to access it.
In Nevada that are now betting with others and I think we'd like to try drafting product is definitely something that we're exploring.
Great nice quarter.
Thank you.
Thank you.
And one moment please for our next question.
Speaker 1: Next question will come from the substantial of people. Your line is open. Hey, good morning, everyone. Thanks for taking a question.
Our next question will come from Jeff potential of Stifel. Your line is open.
Hey, good morning, everyone. Thanks for taking my question and nice quarter.
<unk>.
Speaker 9: is on the continued structural hold rate expansion. You know, it seems that a lot of time is spent talking about the parlays and the impact on MIX, but maybe not as much on the optimized trading and risk management improvements you guys have made. Can you just unpack this a bit more for us? I guess are there specific that types of sports or you've been getting better at minimizing these trading inefficiencies? And...
As on the continued structural hold rate expansion. It seems that a lot of time has been talking about the parlays and the impact on mix, but maybe not as much on the optimized trading and risk management improvements you guys have made can you just unpack this a bit.
Bit more for US I guess are there specific that tighter sports where have you been.
We're getting better at minimizing these trading inefficiencies and how do you think about further upside here are there any comps you would point to or perhaps youre tracking.
Speaker 9: How do you think about further upside here? Are there any comps you would point to or perhaps you're tracking and even better spread between called the underlying vague and the real edge hold rates? Thanks.
Even better spread between call it the underlying vegan and the realized hold rates. Thanks.
Speaker 6: Very good question. I think you're absolutely right that we've talked and everybody's talked a lot about parlay mix and average like countless are certainly very important drivers of of whole rate improvement but there is also you know the there are also the other levers that you mentioned. I would say that really across the board we feel we've improved. In fact
Very good question I think youre, absolutely right that we've talked and everybody has talked a lot about partly mix and average like count and those are certainly very important drivers of whole rate improvement, but there is also.
There are also the other levers that you mentioned I would say that really across the board. We feel we have improved and in fact, the Q2 outperformance is really more a function of those other things that you mentioned because parlay mix, even though his way up year over year was kind of on track with our expectations. So it was really a customer risk management the trading improvement.
Speaker 6: You know, the Q2 outperformance is really more a function of those other things that you mentioned because Parlay Mix, even though it was way up year over year, was kind of on track with our expectations. So it was really a customer risk management, the trading improvement.
Yeah.
Speaker 6: You know, we've spent a lot of dev effort on tooling for our traders to make it easier for them to adjust lines, spot soft lines to move them faster and to better optimize them. We've also really significantly invested in our modeling and approach for customer risk management. So I think those are things that are really paying off as well as you look at the whole rate improvement and the performance in Q2. Thank you. Double, thank you Jason.
We've spent a lot of dev effort on tooling for our traders to make it easier for them to adjust lines thoughts offline to move them faster and better optimize then we are also really significantly invested in our modeling approach for customer risk management.
So I think those are things that are really paying off as well as you look at the whole rate improvement and the outperformance in Q2.
Yeah.
Thanks, Jason.
Thank you.
Thank you.
And one moment please for our next question.
Okay.
Speaker 1: Next question will come from the line of John Decree of CBRE Securities. Your line is open. Good morning Jason Jason. Thanks sir.
Our next question will come from the line of John Decree of CB Ari Securities. Your line is open.
Good morning, Jason Jason Thanks for taking all the questions.
Speaker 9: Maybe one back to the roots on DFS, and a much smaller piece of the business now, but I was wondering if you could, you know, just a little insight as to how that business is trending in the context of customer acquisition. So as you enter new states, are you still getting the similar kind of initial crosssell out of DFS that you did?
Maybe one back to the roots on DFS I know much smaller piece of the business now, but I was wondering if you could give us a little insight as to.
How that business is trending in the context of customer acquisition.
So as you enter new states or are you still getting the similar kind of initial cross sell out of PFS that you did maybe two to three years ago and you're in your older Vintage States and then is PFS still.
Speaker 9: maybe two to three years ago in your older vintage states and then is the FF still kind of an ongoing tool in those older vintage states where he's still acquiring customers via TFS first.
Kind of an ongoing tool in those older vintage stage III still acquiring customers via TFS first.
Absolutely I mean, thats actually has had a great year so far.
Speaker 16: Absolutely. I mean, DSF actually has had a great year so far. And, you know, that's been driven by a lot of improvements we've made across the product. That's all. I've seen a big jump year over year. And that's something that you can sort of use as a little bit of a litmus test for, or maybe an advanced test for how NFL season's going to go because a lot of those drafts happen in the July off its time frame.
And that's been driven by a lot of improvements we've made across the product basketball has seen a big jump year over year, and that's something that you can sort of use it.
A little bit of a litmus test for.
Maybe it advanced tests per how NFL season is going to go because a lot of those that happen in the July August timeframe. So very exciting year for DFS. We have some really good plan for the back half of the year on that product and it is continually adding new customers. We have seen really strong crossover continue from BFS when we launch new state.
Speaker 6: So very exciting year for DFS. We have some really good stuff planned for the back half the year on that product. And it is continually adding new customers. We have seen really strong crossover continue from DFS when we launched New State. So everything seems to be working on that front and it continues to be a big source of engagement for customers.
So everything seems to be working on that Brian and it continues to be a big source of engagement for our customers.
Speaker 6: States that don't have sports betting as well as a great funnel for a new state that wants.
Don't have sports betting as well as a great funnel for.
Our new states that launch.
Thank you. So I think I think you answered my follow up in there, but just to ask it explicitly.
Speaker 9: I think you answered my follow up in there, but just to ask it explicitly, customers that cross over from DFS to sports and or eye gaming, are they still retained as DFS? So you're seeing customers play, you know, going back and forth still, or what's the, what happens when they cross over on OSB? Do they kind of reduce their time on DFS? Are you still seeing, you know, multi-product use across the customer base?
Customers that that crossover from TFS to sports <unk> gaming are.
Are they still retained as DFS, so youre seeing customers play.
Ill go back in for still or whats the what happens when they cross over to OSB debate do they kind of reduce their time on DFS or are you still seeing.
Multi product use across the customer base.
Speaker 6: Oh, definitely seeing multi-product use. I mean, there's some cannibalization, of course, but it's not very significant, B.
Oh definitely seeing multi product I mean, there is some cannibalization of course, but it's not very significant.
Speaker 6: The products are pretty different and you know people like them for different reasons.
The products are pretty different and.
People like them for different reasons.
Speaker 6: People also are not spending a ton of money on DFS, so it's really not like a big wallet thing to, you know, it's more of an engagement thing.
People also are not spending a ton of money on DFS. So it's really not like a big wallet thing to.
It's more of an engagement thing.
Speaker 6: And they are different products and I think that they they provide different types of experiences for people. So we are seeing a great deal of crossover but we're also seeing great retention across all those products as well.
And they are different products and I think that they provide different types of experiences for people. So we are seeing a great deal of crossover, but we're also seeing great retention across all of those products as well and it appears the cannibalization is fairly minimal on a lot of it also happens in the initial launch stages people are very excited about.
Speaker 6: It appears that the cannibalization is fairly minimal. And a lot of it also happens in the initial launch stages. People are very excited about sports betting. They maybe forget about DFS for a little bit, but we're seeing some of our older state ventages.
Sports betting maybe forget about DFS for a little bit, but what we're seeing in some of our older State vintages is as time goes on they come back and some of the cannibalization, even though it wasn't that significant to begin with even that small bits of cannibalization, we're seeing reverse in some of our older state.
Speaker 6: is as time goes on, they come back and some of the cannibalization, even though it wasn't that significant to begin with, even that small bits of cannibalization were seeing reversed in some of our roles.
Great I appreciate that Jason and congratulations on a fantastic quarter.
Speaker 9: Great, I appreciate that Jason and the congratulations on a fantastic quarter. Thank you so much.
Thank you so much.
Thank you.
Yes.
Speaker 1: And this will end the Q&A session. I would now like to turn the conference back to Jason Robbins for closing remarks.
And this will end the Q&A session I would now like to turn the conference back to Jason Robins for closing remarks.
Speaker 16: Thank you all for joining us on today's call. We are an excellent first half of 23. We are laser focused on the back half and on the fall. And we're very excited about the rest of the year and beyond. I look forward to speaking with you over the next few weeks and hope you all stay safe and well. Thanks.
Thank you all for joining us on today's call. We had an excellent first half of 'twenty. Three we are laser focused on the back half and on the fall and we're very excited about the rest of the year and beyond.
Forward to speaking with you over the next few weeks and hope you all stay safe and well. Thank you.
Speaker 1: This concludes today's conference call. Thank you all for participating. You may now disconnect. Have a pleasant day and enjoy your weekend.
This concludes today's conference call. Thank you all for participating you may now disconnect have a pleasant day and enjoy your weekend.
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Good day and thank you for standing by welcome to the Draft Kings Q2, 2023 earnings Conference call. At this time, all participants are in a listen only mode.
Speaker 1: Good day and thank you for standing by. Welcome to the DraftKings Q2 2023 earnings conference call. At this time, all participants on our Listen Only mode.
Speaker 1: After the speech is presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 11 on your phone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
The speaker's presentation, there will be a question and answer session to ask a question during that session you will need to press star one one on your phone you will then hear an automated method advising your hand is raised to withdraw. Your question. Please go ahead star one one again.
Please be advised that today's conference is being recorded and I will.
Speaker 1: Please be a survivor today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Mr. Stanton Dodge, Chief Legal Officer. Sir, please go ahead.
I'd now like to hand, the conference over to your Speaker today, Mr. Stanton Dodge Chief Legal officer, Sir. Please go ahead.
Good morning, everyone and thanks for joining us today.
Speaker 2: certain statements we make during this call may constitute board looking statements that are subject to risks, uncertainties, and other factors as discussed further in RSEC violence that could cause our actual results to differ materially from our historical results or from our forecast. We assume no responsibility to update board looking statements other than as required by law. During this call, manager will also discuss certain non- GAAP financial ...
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 forecast.
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 drought King's operating performance. These measures should not be considered in isolation or as a substitute for <unk> financial results prepared in accordance with GAAP reconciliations.
Speaker 2: that we believe may be useful in evaluating graph kings operating performance. These measures should not be considered in isolation or as a substitute for graph kings financial results prepared in accordance with gap. Reconciliation of these non- GAAP measures to the most directly comparable GAAP measures are available in our earnings presentation.
Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings presentation.
Speaker 2: which can be found on our website in our quarterly report on form 10Q filed with the SEC. Hosting the call today, we have Jason Robbins, co-founder and chief executive officer of draftings who will share some opening remarks and an update on our business. And Jason Park, chief panel officer of draft.
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 and Chief Executive Officer, Droppings, who will share some opening remarks, and an update on our business adjacent park chief.
Officer Draft Kings, who will provide a review of our financials and we will then open the line to questions I will now turn the call over to Jason Robins.
Speaker 2: We'll provide a review of our financials, and we will then open the line to questions. I'll now turn the call over to Jason Robb.
Good morning. Thank you all for joining I'm excited to be with you today and talk about our outstanding second quarter and significantly improved outlook for fiscal year 2023.
Speaker 16: Good morning, thank you all for joining. I'm excited to be with you today to talk about our outstanding second quarter and significantly improved outlook for fiscal year 2020.
Speaker 16: Reving you in adjusted EBITDA exceeded expectations in the second quarter. And importantly, we generated significant positive adjustments.
Revenue and adjusted EBITDA exceeded expectations in the second quarter and importantly, we generated significant positive adjusted EBITDA second quarter.
Speaker 16: Second quarter revenue increased 88% year over year to $875 million.
<unk> revenue increased 88% year over year to $875 million.
Our revenue growth trajectory has been very strong due to our continued focus on enhancing our product and improving our customer experience, which is driving excellent retention in a rapidly improving monetization at.
Speaker 16: A revenue growth trajectory has been very strong due to our continued focus on enhancing our product and improving our customer experience, which is driving excellent retention in a rep.
Speaker 16: At the same time, we remain relentlessly focused on efficiency. And our mantra of revenue growth and cost efficiency is now a core ten of your...
At the same time, we remain relentlessly focused on efficiency and our mantra of revenue growth and cost efficiency is now a core tenant of the organization.
Speaker 16: As a result of our strong revenue growth and ongoing efforts to capture efficiency.
As a result of our strong revenue growth and ongoing efforts to capture efficiencies, we delivered $73 million of positive adjusted EBITDA in the second quarter.
Speaker 16: We delivered $73 million of positive adjust to be returned the second.
We are increasing our full year revenue guidance to a range of $3 $46 billion to $3 $5 4 billion.
Speaker 16: We are increasing our full year revenue guidance to a range of $3.46 billion to $3.54 billion. Employing growth of 56% year-over-year.
Implying growth of 56% year over year at the midpoint of our fiscal year 2023 revenue guidance includes our expectation of nearly $1 $2 billion of revenue in the fourth quarter of 2023.
Speaker 16: Our fiscal year 2023 revenue guidance includes our expectation of nearly $1.2 billion of revenue in the fourth quarter of 2020.
We are also improving our full year adjusted EBITDA guidance to a range of negative 199.
$220 million.
Speaker 16: An improvement of 35% at the midpoint versus our May full year.
An improvement of 35% at the midpoint versus our may full year guidance.
Speaker 16: Our fiscal year 2023 adjusted the eva de guidance includes our expectation of $150 million to $175 million and adjust the divita in the fourth quarter.
Our fiscal year 2023, adjusted EBITDA guidance includes our expectation of $150 million to $175 million and adjusted EBITDA in the fourth quarter of this year.
Speaker 16: Turning to our OSB product. We've continued to focus on powering our own same game parlay and differentiating our live betting.
Turning to our OSB product, we have continued to focus on powering our own team gained parlays in differentiating our live betting content. We now have lives same game parlays built in house for most of the major sports, including NFL NBA MLB College football and college basketball and added to our live markets for golf.
Speaker 16: We now have live same game parlay as built in-house for most of the major sports, including NSL, MBA, MLB, College Football, and College Basketball, and added to our live markets for golf, tennis, and M.
An MLP.
We are improving our product at a very fast velocity with very high quality.
Speaker 16: We were improving our product and very fast velocity with very high quality.
Speaker 16: And eye gaming, or executing our two brand strategy while focusing on differentiating through more in-house content, including live dealer and jackpot.
And I gaming, we're executing our two brand strategy, while focusing on differentiating through more in house content, including live dealer and jackpot offerings. Our persistent focus on product differentiation is already apparent in share trends in the states, where we're currently lives we achieved OSB handle share of 35% and OSB GTR.
Speaker 16: Our persistent focus on product differentiation is already apparent and shared.
Speaker 16: And the states where we are currently lies, we achieved OSB handle share of 35% and OSB GDR share of 32% in the quarter, which were the highest they have been since the COVID impacted second quarter.
32% in the quarter, which are the highest they have been the COVID-19 impacted second quarter of 2020.
We also maintain number one gaming GTR position and set an all time record for I gaming GTR share at 27%.
Speaker 16: We also maintain number one eye game into GR position and set an all time record for our eye game into GR share at 27.
Speaker 16: Looking ahead, we are very excited for football season. Our entire organization is dialed in and ready for the start of NFL and NCAA football. I am proud of the team that...
Looking ahead, we are very excited for football season, our entire organization has dialed in and ready for the start of NFL and NCAA football I am proud of the team and the culture. We have put in place in particular I am proud of our team for their relentless focus on efficiency and expense management over the past 12 months, our work of achieving and is not done and we feel.
Speaker 16: In particular, I am proud of our team for the relentless focus on efficiency and expense management over the past 12 months. Our work of achieving ends is not done and we feel great about the trajectory of the business. With that, I will turn...
Great about the trajectory of the business with that I will turn it over and adjacent park.
Thank you Jason I'll hit on the highlights, including our Q2 performance and our improved 2023 guidance. Please note that all income statement measures discussed except revenue are on a non-GAAP adjusted EBITDA basis.
Speaker 13: Thank you, Jason. I'll hit on the highlights, including our two two performance and our improved 2023 guidance. Please note that all income statement measures discussed except the revenue are on a non-GAAP adjusted EBITDA base.
Speaker 13: And Jason mentioned the organization is executing very well and not a showing up in our results. We achieved $875 million of revenue in the quarter, which is 88% higher than our second quarter 2022 revenue. And our adjusted EBITDA of positive $73 million significantly outperformed our expectations and improved by nearly $200 million on the year-over-year base.
As Jason mentioned the organization is executing very well and that is showing up in our results we achieved $875 million.
In the quarter, which is 88% higher than our second quarter 2022 revenue and our adjusted EBITDA of positive $73 million significantly outperformed our expectations and improved by nearly $200 million on a year over year basis.
Customer retention and engagement outperformed expectations as we successfully transition customers from the NBA season into MLP, we have seen a significantly better than expected engagement on MLB due to our enhanced product.
Speaker 13: Customer retention and engagement outperformed expectations as we successfully transition customers from the MBA using into MLB. We have seen significantly better than expected engagement on MLB due to our enhanced process.
Speaker 13: structural holds also above expectations at approximately 9% to the quarter, while promotional intensity improve together supporting a more than 550 basis point year-to-year improvement in our adjusted gross margin rate to 47%.
Structural heart was also above expectations at approximately 9% for the quarter, while promotional intensity improved together supporting a more than 550 basis point year over year improvement in our adjusted gross margin rate to 47%.
Fixed expenses were slightly better than expected as we manage vendor related costs and exerted discipline on our compensation expense.
Speaker 13: Fixed expenses were slightly better than expected as we managed vendor related costs and exerted discipline on our compensation.
Speaker 13: We will particularly please with our votes and our more mature online sportsbook and argue.
We're particularly pleased with the results in our more mature online sports book, an argument seats in our states that launch from 2018 through 2021, combined handle growth accelerated quarter over quarter and increased more than 35% compared to the same period in 2022 in these states revenue increased more than 70% year over year.
Speaker 13: In our states that launched from 2018 through 2021, combined handle growth accelerated quarter over quarter and increased more than 35% compared to the same period in 2022. In these states, revenue increased more than 70% year over year, adjusted growth margin rate increased more than 800 basis points, and external marketing declined more than 10%. While total unique customers increased approximately 25%.
Adjusted gross margin rate increased more than 800 basis points and external marketing declined more than 10%, while total unique customers increased approximately 25%.
Okay.
Speaker 13: These strong results and our visibility and to continue to improve have enabled us to raise our four-year 2023 revenue guidance range to 3.46 billion to 3.54 billion from 3.135 billion to 3.235 billion or by $315 million at the mid.
These strong results and our visibility into continued improvement have enabled us to raise our full year 2023 revenue guidance range to $3 $4 6 billion to $3. Five 4 billion from three one to three 5 billion to three to three 5 billion or by $315 million at the midpoint.
Speaker 13: We are also improving our four-year 2023 adjusted EBITDA guidance range to negative 190 million to negative 220 million from negative 290 million to negative 340 million or by 110 million at the mid-
We are also improving our full year 2023, adjusted EBITDA guidance range to negative $190 million to negative $220 million from negative $290 million to negative $340 million or by $110 million at the midpoint.
Speaker 13: The bridge from our May full year 2023 guidance to our current full year 2023 guidance includes increases due to stronger customer retention, acquisition and engagement, structural sports, book hold improvement and favorable sport outcomes in the second quarter. These items are partially offset by Kentucky now launching this year and being included in our forecast and Ohio's tax rate increasing affected July per
The bridge from our full year 2023 guidance to our current full year 2023 guidance includes increases due to stronger customer retention and acquisition engagement structural sports book hoard improvement and favorable sport outcomes in the second quarter. These items are partially offset by Kentucky now launching this year and being included in our forecast and <unk>.
Highest tax rate increases effective July one.
Customer retention acquisition and engagement are exceeding expectations and account for $225 million of the revenue improvement and $100 million will be adjusted EBITDA improvement.
Speaker 13: Customer retention, acquisition, and engagement are exceeding expectations and accounts for $225 million of the revenue improvement and $100 million of the adjusted EBITAM.
Speaker 13: Our structural sportsbook hold percentage book cats is also higher, supported by our introduction of in-house scene game parlay capabilities and new live betting.
Our structural sports book whole percentage forecast is also higher supported by our introduction of in house game Parlay capabilities, a new lifestyle markets. This trend accounts for $40 million of the revenue improvement and $30 million of the adjusted EBITDA improvement.
Speaker 13: This trend accounts for 40 million of the revenue improvement and 30 million of the Pero,
Speaker 13: favorable sport outcomes in the second quarter contribute 30 million to the revenue improvement and 20 million to the adjusted EBITDA.
<unk> sport outcomes in the second quarter contribute $30 million to the revenue improvement and $20 million to the adjusted EBITDA improvement.
Speaker 13: We are very excited that Kentucky's horse racing commission recently set a target launch date of September 28, 2023 for online sports betting, which is sooner than we previously anticipated. As a result, we expect 20 million of additional revenue in 2023 and a headwind of 30 million to 2023 adjusted.
We are very excited the Kentucky Horse Racing Commission recently set a target launch date of September 28, 2023 for online sports betting, which is sooner than we previously anticipated as a result, we expect $20 million of additional revenue in 2023, and the headwind of $30 million to 2023 of adjusted EBITDA.
Speaker 13: Last, we expect Ohio's increased tax rate from 10% to 20%, which went into effect July 1st, to result in $10 million of additional costs.
Last we expect Ohio increased tax rate from 10% to 20%, which went into effect July one to result in $10 million of additional costs. This year.
In terms of our full year 2023, adjusted gross margin percentage, we now expect to be in the 43% to 45% range an improvement from our previous guidance of 42% to 45%.
Speaker 13: In terms of our four year 2023 adjusted gross margin percentage, we now expect to be in the 43 to 45% range and improvement from our previous guidance of 42 to 45.
Speaker 13: We expect contribution profit, which we define as a just a gross profit less external marketing to grow to approximately $700 million in fiscal year 2023, which includes our investment into pre-t
We expect the contribution profit, which we define as adjusted gross profit less external marketing to grow to approximately $700 million in fiscal year 2023, which includes our investment in Kentucky.
Speaker 13: With regard to our balance sheet, we ended the second quarter with 1.1 billion of cash and now planned to end the year with more than 1 billion. As a reminder, we expect approximately $120 million of capital expenditures and capitalized software development costs for fiscal year 2023 and change in networking capital to be slightly positive for the year.
With regard to our balance sheet. We ended the second quarter with $1 1 billion of cash and now plan to end the year with more than $1 billion. As a reminder, we expect approximately $120 million of capital expenditures and capitalized software development costs for fiscal year 2023, and change in net working capital to be slightly positive for the year.
In sum, we had a strong second quarter and are very excited for the upcoming football season that.
Speaker 13: In some, we had a strong second quarter and are very excited for the upcoming football season. That concludes our remarks, and we will now open the line for questions.
That concludes our remarks, we will now open the line for questions.
Speaker 1: Thank you. As a reminder, to ask a question, please press Star 11 on your phone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Stand by as a compile to Q&A roster.AU yacht rescued.
Thank you.
As a reminder to ask a question. Please press star one on your phone and wait for your name to be announced to withdraw. Your question. Please press star one again standby as we compile the Q&A roster.
One moment please for our first question.
Our first question will come from Shaun Kelley of Bank of America. Your line is open.
Speaker 1: Our first question will come from Sean Kelly of Bank of America. Your line is open.
Hi, Good morning, everyone and thank you for taking my questions.
Speaker 5: Hi, good morning everyone and thank you for taking my questions.
Jason Jason maybe just to start off.
Speaker 5: Jason or Jason maybe just to start off obviously, you know, dramatic market share gains and I think a lot of this comes back to just truly core product improvement. So, I was wondering if you could give us just a little bit of color on what you think the big success stories have been over the last.
Obviously dramatic market share gains and I think a lot of this comes back to just truly core product improvement. So I was wondering if you could give us just a little bit of color on what you think the big success stories have been over the last 369 months on the product side, and then maybe to put it in quantification terms.
Speaker 5: you know, three, six, nine months on the product side. And then maybe to put it in quantification terms, what would it take to narrow the gap between your OSB handle share that you outlined at 35% and the OSB GGR share at 32% is that a realistic goal?
What would it take to narrow the gap between your OSB handle share that you outlined it to 35% and the OSB GTR share at 32% is that a realistic goal.
Thank you Sean.
Speaker 16: Thank you, Sean. So, first on the question around product, it's been a lot of things. I think...
First on the question around product, it's been a lot of things.
I think it's a very complicated product and theres a lot of things that can create customer friction.
Speaker 6: It's a very complicated product and there's a lot of things that can create custom refriction if you're not careful and I think really a big focus for us over the last year and a half has been removing custom refriction throughout the journeys. So that's been a big deal. We've obviously greatly enhanced our same game parlay offering that's been a huge part of the story over the last six to eight months.
If youre not careful and I think really a big focus for us over the last year and a half has been removing customer friction throughout the journeys. So that's been a big deal. We've obviously greatly enhanced our same game parlay offering that's been a huge part of the story over the last six to eight months.
And I think our live betting options have gotten better as well I can objectively say I think.
Speaker 6: And I think our live betting options have gotten better as well. I can objectively say, I think, you know, in H2, we feel we're going to have the best product in the market. So really excited about that. And I think that's the big difference maker, as you noted. As far as hold rate goes, you know, we're continually working to improve that. We've obviously closed the gap quite a bit between Handle Share and GGR Share. And I have no reason to believe that we can't continue to do that.
Two we feel we're going to have the best product in the market. So really excited about that and I think thats the big difference maker as you noted.
As far as the whole rate goes we're continually working to improve that we've obviously closed the gap quite a bit between handle share and <unk> share and I have no reason to believe that we can continue to do that.
Thank you very much.
Okay.
Thank you.
Speaker 1: Thank you. One moment please for our next question.
One moment. Please next question.
Our next question will come from Stephen Grambling of Morgan Stanley . Your line is open.
Speaker 1: The question will come from Stephen Grabbling of Morgan Stanley . Your line is open.
Hey, thanks for taking the questions.
Speaker 4: Hey, thanks for taking the questions. I'm going to change over to marketing and cost. It looks like in the back half the assumption is her, you know, effectively, I think.
I'm going to change over to marketing and cross it looks like in the back half of the assumption is for.
Effectively I think.
Speaker 4: Very much lower growth. So it seems like you're continuing to be focused on reducing costs. Are there still big contracts out that could be up for renegotiation or that we could be considering as we look into the second half or in the next year as we look at the guidance or beyond?
Much lower growth. So it seems like you're continuing to be focused on reducing costs are there still big contracts out there could be up for renegotiation or that.
It could be considering as we look into the second half or into next year as we look at the guidance or beyond.
Yes, it's a good question I mean, we always are reevaluating every time, we have a deal come up whether it makes sense to continue and at what price and that's a continual thing so.
Speaker 16: Yeah, it's a good question. I mean, we always are reevaluating every time we have a deal come up, whether it makes sense to continue and at what price.
Speaker 16: And that's a continual thing. So, you know, we're gonna continue just over the course of our lifetime to see optimization there.
We're going to continue just over the course of our lifetime does the optimization there.
Speaker 6: I think same thing across the board with marketing, with promotion. And I do think there's opportunity also if we can gain more market share to generate better top line as well. So those are really the core areas of focus for the company. I think on the corporate cost side, we really, there's probably little bits here and there. We really spent so much effort on that for the last year and a half or so that I think the low hanging fruit there has been picked.
Same thing across the board with marketing and promotion.
I do think there is opportunity also if we can gain more market share to generate better top line as well. So those are really the core areas of focus for the company I think on the corporate cost side, we really there's probably a little bit here and there. We've really spent so much effort on that for the last year and a half or so.
The low hanging fruit there has been picked.
Speaker 6: But certainly the intent is to have significantly slower fixed cost growth next year. And I do think there's some room to optimize some of the levers that I'm...
But certainly the intent is to have significantly slower fixed cost growth next year and I do think theres some room to optimize some of the levers that I mentioned.
But as a quick clarification on any of the bigger kind of national marketing contracts.
Speaker 4: But as a quick clarification, are any of the bigger kind of national marketing contracts embedded in the guidance in terms of cost reductions, or are those still kind of outstanding? No, we don't have any cost reductions embedded in the guidance from any of that.
Embedded in the guidance in terms of cost reductions are those still kind of outstanding we don't have any cost reductions embedded in the guidance from any of that.
Speaker 16: Great, thank you so much. Certainly, as I mentioned, always look at when things come up, but we're at this point not building any favorable renegotiations into the guidance.
Great. Thank you so much certainly as I mentioned always look at when things come up but we're at this point not building any favorable renegotiations into the guidance.
Makes sense. Thank you.
Thanks.
Speaker 6: And Steven, as you know, our approach to guidance in general has been we're going to bake what we know. If we have lots of things that we're working on, some of them may come through, some of them may not. So we don't kind of forecast like a probability adjusted number. We really bake what we know. And then we look at anything like you're describing as well as potentially any additional market share gains or anything else that might drive top line. We look at that as upside.
Steven as you know.
Our approach to guidance in general has been we're going to bake what we know.
If we have lots of things that we're working on.
Some of them may come through some of them may not so we don't kind of forecast a probability adjusted number we really bake what we know and then we look at anything like Youre, describing as well as potentially any additional market share gains or anything else that might drive top line, we look at that as upside.
Speaker 3: I would add, Steven, that these types of team and league deals are a much smaller percentage of our total marketing expense than some of the other operators in the industry. And as a general philosophy, we have implemented more short duration deals to give us the chance to evaluate actual performance more frequently.
I would add Stephen that these types of team and league deals are a much smaller percentage of our total marketing expense than some of the other operators in the industry.
<unk>.
As a general philosophy, we have implemented more short duration deals to give us a chance to evaluate actual performance.
More frequently.
Okay.
Thank you.
Speaker 1: Thank you. One moment please for our next question.
One moment please for our next question.
Our next question will come from David Katz of Jefferies. Your line is open.
Speaker 1: Our next question will come from David Katz of Jeffries. Your line is open.
Hi, good morning. Thanks.
Speaker 19: Hi, good morning. Thanks for taking my question. So in the comments you talk about backward looking friction removal as a product focus, can you just talk a bit more about how that focus looks going forward and what the to do list is to keep your product on a winning track.
Thanks for taking my question so.
Comments, you talked about backward looking friction removal as a product focus.
Just talk a bit more about how that focus looks going forward and what to do with us.
So to keep your product and on a winning track.
It's a great question I mean, I think that this is an area that there is still a lot left to do.
Speaker 16: It's a great question. I mean, I think that this is an area that there's still a lot left to do.
Speaker 16: You know, it's true of any product in the digital space that there's always going to be room to optimize your funnels and improve the experience, but particularly in regulated gaming, where there's a lot of requirements that you have to follow, and there's a lot of states that launch very quickly. So, you know, the focus for us has been on how do we get live and make sure that we're complying with all relevant laws and regulations.
It's true of any product in the digital space that there is always going to be room to optimize your funnel and improve the experience, but particularly in regulated gaming where theres a lot of requirements that you have to follow and Theres a lot of states. The launch very quickly. So the focus for US has been on how do we get live and make sure.
That we're complying with all relevant laws and regulations.
Speaker 6: I think as you then kind of say, okay, let's take a look at along the way. What is that done that might have created, you know, bad experiences for customers?
I think as you then kind of say, okay, let's take a look at along the way what has that done.
Have created bad experiences for customers.
Lags that go off that were misfires or things that were actually correct, but don't really properly give the customer a path to resolving them.
Speaker 6: even this better explanation. I think there's so much there. And for us, it's really about the customer experience. We look at the product and we say, if you're a customer, what element of it would be frustrating? What element of it would make you feel like I'm just going to go try somewhere else? And we try to improve that the best we can.
Even better explanation I think there is so much there.
And for US, it's really about the customer experience, we look at the product and we say if youre a customer what elements of it would be frustrating what elements of it would make you feel like I'm just going to go try somewhere else and we try to improve that the best we can obviously, making sure that we continue to follow our compliant stay compliant with all regulations.
Speaker 6: Obviously making sure that we continue to follow all compliance. It's a compliant with all regulations and laws and every jurisdiction that we operate.
Laws in every jurisdiction that we operate and I think there is.
Speaker 6: But I think there's a lot there and just will continually be because of this sort of, you know, nature of the regulated gaming industry and I think particularly now given how many states launched now quickly, there's just a lot of low-hanging fruit still available.
A lot there and just will continually be because of this sort of nature of the regulated gaming industry and I think particularly now given how many states launched now quickly theres just a lot of low hanging fruit still available on that front.
Speaker 19: Understood. As my follow-up, I do have to ask, periodically there's a lot of discussion and I think it's been obviously ramping up M&A. What are the boundaries and what thoughts might you be able to share in terms of what you might want for or need to keep the momentum going?
Understood.
A follow up I do have to ask.
Periodically there's a lot of discussion and I think it's been obviously ramping up M&A.
What are the boundaries.
What thoughts might you be able to share in terms of what you might want or need.
To keep the momentum going.
Speaker 6: You know, I know there's a lot of chatter about M&A at this point.
I know theres a lot of chatter about M&A at this point, we're about I mean, we had a great quarter, we're really excited about that.
Speaker 6: we're about to meet with great quarter really excited about that uh... but you know work on on to this quarter it's about to be the most important time of year season late for us
But we're kind of on to this quarter, it's about to be the most important time of year seasonally for US we have fall coming up with the NFL and college football calendar MBA.
Speaker 16: We have fall coming up with the NFL and called Football Calendar MBA. Lots of things happening this fall. So this is the most important time of year. This is when we acquire the most customers, when we have the biggest opportunity to gain more market share. So we generate the most revenue, we'll generate the most EBDA. I think this is so important, you know, a moment for draft kings that we have team laser focused on executing and everybody's really dialed in. Now we have a lot of exciting stuff coming for NFL and college football, basketball and hockey.
Lots of things happening. This fall. So this is the most important time of year. This is when we acquire the most customers. When we had the biggest opportunity to gain more market share to where we generate the most revenue and will generate the most EBITDA I think this is so important Ah moment for draft Kings, we have team laser focused on executing in <unk>.
Everybody is really dialed in now we have a lot of exciting stuff coming for NFL and college football and basketball and hockey and everything else and we're pretty excited about that.
Speaker 16: Everything else and we're pretty excited about that and
Speaker 16: You know listen, there's always talk of things happening in the background and we have you know small teams that make sure they're aware of what's going on but as a company we're very very focused on executing winning in the US.
There's always talk of things happening in the background and we have small teams that make sure. They are aware of what's going on but as a company. We're very very focused on executing and winning in the U S.
Perfect. Thank you very much good luck.
Thank you.
Thank you.
Speaker 1: Thank you. Once again, one moment for our next question.
One more thing in one moment for our next question.
Okay.
Speaker 1: Our next question will come from Robin Fawley of UBS. Your line is open.
Our next question will come from Robin Farley of UBS. Your line is open.
Speaker 8: Great, thanks. I wonder if you could talk a little bit about the percent of players that migrate from the OSB side to the eye gaming flight and how that's kind of changed from before golden nuggets.
Great. Thanks, I Wonder if you could talk a little bit about that.
Of players that migrate from the OSB side, gaining side and how thats kind of changed from before Golden Nugget till now.
Hi, Robyn thank you so.
Speaker 16: I rob and thank you. So, you know, it's been pretty consistent actually around 50% in states that have both products tend to cross over.
It's been pretty consistent actually around 50% in states that have both products tend to crossover.
That hasnt really changed with Golden Nugget, because Golden Nugget is such a smaller piece of the.
Speaker 16: you know that hasn't really changed with golden nugget because golden nugget is such a smaller piece of of the pie it's you know less than 5% of our revenue so that's really moved the overall needle we do see you know golden nugget is certainly more dominant casino brands so the crossover is a little bit less there but you know it doesn't really move the needle on the overall business the overall business is stay pretty consistent in the 50th percent range
Pi, it's less than 5% of our revenue.
So it hasnt really move the overall needle we do see Golden Nugget is certainly more dominant casino brands. So the crossover is a little bit less there.
But it doesn't really move the needle on the overall business. The overall business has stayed pretty consistent in the 50 ish percent range.
Speaker 8: Okay, and do you expect that to change when you talk about my reading in the next couple months to the draft King's Tech Tag or not necessarily it sounds like.
Okay and do you expect that to change when you talk about migrating in the next couple of months too.
Keith Tech stack or not necessarily it sounds like.
Speaker 16: I don't think so, at least not in the short term because it's such a small piece of the revenue, but certainly we hope that that's a brand that grows and becomes bigger and bigger and it could potentially impact long-term, but I don't think we expect an immediate change when we migrate. I think if anything, the focus will be on continuing to build out the casino audience and the CRM and Cross-Cell multi-brand strategy within Casino, but...
I don't think so at least not in the short term because it's such a small piece of the revenue, but certainly we hope that that's a brand that grows and becomes bigger and bigger and it could potentially impact long term, but I don't think we expect an immediate change when we migrate I think if anything.
The focus will be on continuing to build out that casino audience.
CRM and cross sell our multi brand strategy within casino, but.
Speaker 16: You know, as time goes on, I think that, you know, we'll have to see how the brand's growing and developing and if it can become more of a, you know, sports brand than it is today, but I think of now, we think of it as more of a casino brand. Okay, great. Thank you.
As time goes on I think that.
We'll have to see how the brands growing and developing and if it can become more of a sports brand than it is today, but I think gives US now we think of it as more of a casino brand.
Okay, great. Thank you.
Okay.
Thank you.
And one moment for our next question.
Yes.
Yeah.
Yes.
Speaker 1: The next question will come from Joe's staff of SIG. Your line is open.
Our next question will come from Joe staff.
Your line is open.
Speaker 15: uh... thank you morning guys i was curious i guess in just in terms of saying maybe the the speed of adoption uh... you know if especially looking at newer states you know you've reached about seven percent adult
Thank you good morning, guys.
I was curious I guess just in terms of understanding maybe the speed of adoption.
Especially looking at newer states.
Have reached about 7% adult.
Speaker 15: popular penetration of the adults in the newest states. And I'm wondering how you think about that continuum in terms of the level of penetration that you have in some of your older states, called it New Jersey or whatever. And then the second question I had was, whether it be the number or the percentage of jurisdictions you operate in that are now contribution positive. Hello. okay.
Population penetration of the adults in the newest states and I'm wondering how you think about that continuum in terms of.
The level of penetration that you have in some of your oldest states colored in new Jersey, or whatever and then the second question I had was.
Whether it be the number or the percentage of jurisdictions you operate in that are now contribution positive Hello pardon me.
Yes.
Matt.
Speaker 11: all right um all ask questions i guess um... again i i was curious of the speed of adoption especially as we think about maybe the newest dates you've you reach about seven percent penetration there and just wondering how quickly now
Alright.
I'll ask the questions I guess.
Again, I was curious of the speed of adoption.
Especially as we think about maybe the newest states.
We reached about 7% penetration there and just wondering how quickly now do we think about that continuum reached.
Speaker 15: Do we think about that continuum reaching penetration of some of your oldest states, whether it be New Jersey or so? Then the second question was really about the percentage or the number of jurisdictions that you operate in, were your contribution positive now? Hello, we're back.
Reaching penetration.
Some of them some of your oldest states, whether it be new Jersey yourself.
Then.
The second question was really about.
The percentage or the number of jurisdictions that you operate in where your contribution positive now.
Hello, we're back.
Back again.
Yes that should be hopefully better.
Speaker 16: So you're asking about the penetration of new states in the past.
So youre asking about the penetration of new state Pat apologize I missed the last part of the question.
Speaker 15: yet another you know just kind of understand the newest dates right you you've reached about seven percent penetration or so uh... in the newest dates and wondering how quickly you think
Yes, no problem.
Just trying to understand the newest states you've reached about 7% penetration or so.
And the newest states and I'm wondering how quickly you think.
That adoption rate.
Speaker 15: you know that that adoption rate um... will get to levels in those newer states that that you have in New Jersey or so
We will get to levels in those newer states that you have in New Jersey yourself.
You know, it's hard to say I mean still very new I think we're continuing to see good acquisition in those new States and then we're going to know a lot more than a couple of months after NFL start.
Speaker 16: You know, it's hard to say. I mean, still very new. I think we're continuing to see good acquisition in those new states. And then we're going to know a lot more in a couple months after NFL starts it.
Speaker 16: That's really, you know, this will be the first time, for example, in Massachusetts, that there's NFL betting available online. So, you know, one would exactly see another wave of customer acquisition, but we'll know more, how things are tracking in the next couple months, and we'll certainly be able to update you on the next running call. And I'll get.
That's great.
The first time for example, in Massachusetts that Theres NFL betting available online. So one would expect you'll see another wave of customer acquisition, but we will know more how things are tracking in the next couple of months and we'll certainly be able to update you on the next earnings call.
Yes.
Speaker 3: And that had Joe, you know, finished our older vintage seats. We continued to see really healthy acquisition. We're obviously bringing marketing spend down in those older seats to match the level of acquisition and achieve appropriate tax. But we haven't really found a ceiling in even our oldest, our most mature state.
Hey, Joe.
Our old older vintage seats, we continue to see really healthy acquisition, we're obviously, bringing marketing spend down the noteholder states to match the level of acquisition and achieve appropriate tax, but we haven't really found its julie.
Our orders are most.
Mature state.
Speaker 15: And one follow-up that I could, are you willing to maybe share with us maybe the percentage of jurisdictions or the number where your contribution positive?
Interesting and one follow up if I could.
Alright are you willing to maybe share with us maybe the percentage of jurisdictions or the number.
Where your contribution positive.
Yes.
Speaker 6: We'll definitely be talking more about that this fall on our Q4 earnings call. And at the QC earnings call in November and on our investor day. I don't want to run the team on that one, but we have lots of different things. Okay, thank you guys.
I'll be talking more about that.
On our Q4 earnings call and that date excuse me Q3 earnings call in November .
At our Investor day.
Okay, I don't want to front run the <unk>.
On that one but we are positive.
Okay.
Okay. Thank you guys.
Yes.
Thank you.
One moment please for our next question.
Our next question will come from Dan pilot.
Speaker 1: Our next question will come from Dan Pulitzer, a Wells Fargo, your line is open.
Wells Fargo. Your line is open.
Hey, good morning, everyone.
Speaker 16: Hey, good morning, everyone. The first one specific question, then maybe one more high level. Just in terms of the quarter, hold these, that was 10%, I think adjusting for the favorable sword out comes around 9%.
First one specific question and then maybe one more high level.
In terms of the quarter hold these that was 10% I think adjusting for the favorable support outcomes around 9%.
Speaker 16: Can you maybe give us just some more detail there? There's the parlay mix and lay count. And then in terms of how you're thinking about this over time, I think your largest competitor has called out a goal of 12%. So it feels like you're closing that gap pretty quickly. How do you think about this evolving over time? And maybe any guy post-railer you think about this year versus next year?
Can you maybe give us just some more detail there in terms of parlay mix in Lea County, and then in terms of how Youre thinking about this over time I think your largest competitors called out our goal of 12%. So it feels like you're closing that gap pretty quickly. How do you think about this evolving over time and maybe any guidepost for how you think about this year versus next year.
Yes, it's a great question on feeling I think we're still trying to figure out what we think the right level an appropriate level to get to is in.
Speaker 6: Yeah, it's a great question on feeling. I think we're still trying to figure out what we think the right level and appropriate level to get to is.
Speaker 6: We'll continue to follow the data. I don't feel like we have enough yet to say that we have a long-term target there other than I think there's still room to increase.
We'll continue to follow the data I don't feel like we have enough yet to say that we have a long term target there other than I think there is still room to increase.
Speaker 6: We thus far have seen really no material impact and handle. So definitely a room to go up.
Thus far has been really no material impact to handle.
So definitely room to go up.
Speaker 6: And you know, parlay mix is actually right on expectation for us this quarter. You know, there's definitely some upside, I think, an average light count with the roll out of our new bed split. It'll be powered by our in-house SGP models. I think that will improve the lag adding experience in the UI. And that should hopefully increase average light count this fall.
And partly mix was actually right on an expectation for us this quarter.
There is definitely some upside I think an average like count with the rollout of our new bet slip that'll be powered by our in house SGP models that will improve that.
Adding experience in the UI and that should hopefully increase average like count this fall.
Speaker 6: But, you know, as far as Q2 those, we were really at where we...
But as far as Q2 goes we're really at where we are.
Speaker 1: One moment please. The speakers, are you able to hear us? Yep, yep, can I just squeeze in one more for my ball? Actually, one moment please, sir. With the robins, Mr. Park, are you able to hear us?
One moment please.
Are you able to hear us.
Can I just squeeze in one more for my follow up.
One moment please sir.
Mr. Robbins, Mr. Parts are you able to hear us.
Okay.
Just wondering just having a technical difficulty please stay on your lines.
Speaker 1: Just want to be just having a technical difficulty. Please stay on your lines. And put me this.
And pardon me Mr. Robin Mr Park are you able to hear us.
Okay.
Mr Pollack, Mr Robbins, yes.
Speaker 1: Mr. Potts, Mr. Robbins. Yes. Here. Sorry. Thank you. Thank you. Can I just squeeze in one quick follow?
Yes, yes.
Yes.
Okay.
Can I just squeeze in one quick follow up.
Speaker 16: Yeah, sure. Okay, okay. Yeah, just looking out the next few years, maybe more long-term. Do you think about seasonality involving? Do you envision a scenario where you could be even the positive into all four quarters? Or you can always kind of have this big jump just given the starved sports season and then maybe the shoulder season.
Yes sure Okay. Okay, Yes, just looking at the next next few years.
Maybe more long term as you think about seasonality involving do you envision a scenario, where you could be EBITDA positive in all four quarters or are you going to always kind of have this big jump just given the star sports season, and then maybe the shoulder season.
Speaker 6: Oh, no, we definitely expect that as the business inflex towards more permanent profitability data.
Oh, no, we definitely expect that as the business and flex towards more.
Permanent profitability there.
Okay.
Yeah.
One moment please.
Sure.
Speaker 1: Speaker will be back on in a moment. Everyone, we ask you to please stand by. Speaker will be back.
Speakers will be back on in a moment.
We ask you to please standby.
Speakers will be back on momentarily.
Speaker 12: Hello? Yes, you can. I mean, if you're able to use. Blind service, I apologize. I don't know if there's a technical issue on the service providers end, but we've tried several different phones here. I apologize to those listening to call. Go ahead.
Hello.
Yes.
Buying service.
Jay I don't know if theres, a technical issue on the service providers and but we tried several different phones here I apologize to those listening to the call.
Go ahead please.
Thanks, that's all for me.
Okay. Thank you.
Thank you.
One moment please for our next question our.
Speaker 1: One more please for our next question. Our next question will come from Colorado, Santa Raleigh of Deutsche Bank. Your line is open.
Next question will come from Carlo Santarelli of Deutsche Bank. Your line is open.
Guys good morning.
Speaker 20: You guys previously, I believe it was back in March of 2022. More or less articulated a longer term goal with sales and marketing representing about 10% of revenue and promotions, sorry, 10% of net revenue and promotions, about 22% of gross revenue. Given the experience over kind of...
You guys previously I believe it was back in March of 2022.
More or less articulated a longer term goal with sales and marketing representing about 10% of revenue in promotions.
Sorry, 10% of net revenue in promotions about 22% of gross revenue.
Given the experience over the last several quarters of reducing promotions and seeing how the customer reacted as well as the experience you've had in your vintage states taking out some of the external marketing are those targets still kind of where youre thinking and do you believe.
Speaker 20: several quarters of reducing promotions, seeing how the customer reacted, as well as the experience you've had in your vintage state, taking out some of the external marketing. Are those...
Speaker 20: You still kind of where you're thinking and do you believe, you know, that do you have any sense around the timeline of when you think you get to those levels?
<unk>.
Do you have any sense around the timeline of when do you think you can get to those levels because are you there.
Right.
Speaker 1: Oh, it just ends really. It just ends here. Um, can you please repeat your question? Yeah, it's very way to fix this issue. It doesn't seem to be on our end. Hmm. I'm going to go in the next question.
Hello.
Center.
Please repeat your question.
Is there a way to.
The.
Issue it doesn't seem to be on our end.
Go ahead.
One moment please.
Can we joined as a participant.
Absolutely is it possible that you can.
Speaker 1: actually is it possible that you can
Speaker 1: Maybe you can call in on a different line. Let me give you a moment. I'm going to pause the call and I will, and we'll work something out. Everyone will ask you to please stay on your lines. Will we resuming of the conference short?
A beacon calling on different line, let me give me one moment ongoing too.
Pause the call.
And I will and well where something else everyone. We ask you to please stay on your lines will be resuming the conference shortly.
Speaker 1: And pardon me, we do apologize. I'm afraid that we do have the incident, what has happened. We do have the speakers back. And one moment, Mr. Carlo Centarelli, I'm going to place you back in so you may ask your questions. One moment please.
And pardon me.
I do apologize im afraid that we do have the inhibit what has happened.
We do have the.
Speakers back and one moment Mr. Carlo Santarelli. Please go back and so you may ask your questions one moment. Please.
Okay.
Okay.
Carlo Santarelli are you able to hear us.
Speaker 21: I could hear you. Yep. Thanks. If you go, please repeat your questions. The management team.
I can hear you yes. Thanks welcome if you could please repeat your questions.
The management team there.
Yes, we're here.
Speaker 20: Hey guys, well you guys were gone. I just gave guidance for 24 to the rest of the phone call. I hope that's alright
Hey, guys. What you guys were gone I just gave guidance for 24 to the rest of the folks on the call I Hope that's alright.
Speaker 20: So, thank you. Thank you. My question related to, with some of the experiences that you've had now reducing promotions, reducing sales and marketing, I believe back in March of 22, you guided sales and marketing kind of as a longer term target to be about 10% of revenue.
Okay. Thank you.
My question related to with some of the experiences that <unk> had now reducing promotions, reducing sales and marketing I believe back in March of 'twenty. Two you guided sales and marketing kind of as a longer term target to be about 10% of revenue with promotions about 22% of GTR Bay.
Speaker 20: with promotions about 22% of GGR, based on kind of your experience in working those expenses lower. You guys feel...
Based on kind of your experience in working those expenses lower.
You guys feel there's an appropriate timeline or do you feel those targets have shifted at all.
Speaker 20: There's an appropriate timeline or do you feel those targets have shifted at all?
Speaker 6: So we'll definitely talk more about this that are upcoming investor day in Q4, but I don't think that there's going to be a material change to either those targets from what we're seeing today, but obviously over the next few months, we'll continue to do the work to prepare and we'll have more to say on that in the fall. All right, thank you, Jason. Thanks, Carla. Thank you.
So we'll definitely talk more about this at our upcoming Investor day in Q4.
But I don't think that there is.
Going to be a material change to either of those targets from what we're seeing today, but obviously over the next few months, we'll continue to do the work to prepare and we will have more to say on that in the fall.
Alright, Thank you Jason.
Thanks Scott.
Thank you one moment please for our next question.
Okay.
Okay.
Our next question will come from Bernie Mcternan of Needham <unk> Company. Your line is open.
Speaker 1: Our next question will come from Bernie McTernan of Needleman Company. Your line is open.
Speaker 14: Great, thanks. Some more and thanks for taking the questions. Jason, can you expand some of the comments in the letter on AI? Should we think about the more revenue-generating opportunities or cost efficiencies and just any specific initiatives or products to point to there in the works? I think it definitely...
Great. Thanks, Good morning, Thanks for taking the questions. Jason can you just expand some of the comments in the letter on AI should we think about the <unk> revenue generating opportunities are cost efficiencies and just any specific initiatives or products to point to that are in the works.
I think it's definitely both.
<unk>.
Speaker 6: You know, when you can do more for less, that drives both revenue and cost efficiency. And so I think that's really the thematic, obviously, depending on what it is and where.
When you can do more for less that drives both revenue and cost efficiency and so I think thats really the thematic obviously, depending on what it is and we're.
Speaker 6: in the stage of development. It is that all affects the relative ways that we use it. I think for example, right now with our developer efficiency initiatives, we're focused on how do we get more done with our development team. So I think that what that probably means is over time, we don't need to add as many engineers to get the work done that we ordered and want to do as we continue to scale the business and build out the product and serve the customer.
And the stage of development. It is that will affect the relative weight that we use it I think for example.
Right now with our developer efficiency initiatives were focused on how do we get more done with our development team.
So I think that what that probably means is over time, we don't need to add as many engineers to get the work done that we didn't want to do as we continue to scale the business and build out the product and serve the customer.
Speaker 6: But I do think it's a combination if you think about it from a P&L standpoint of both cost opportunity and revenue opportunity. None of that is baked into any of our guidance or any of the things we share in the past to invest today. This is something that we really view as upside and you know, it's in the category of, you know, the long list of things that we're working on that we think could create even better long-term economics for a shareholder.
But I do think it's a combination if you think about it from a P&L standpoint, it both cost opportunity and revenue opportunity none of that is baked into any of our guidance or any of the things. We've shared in the past at Investor Day. This is something that we really view it as upside in <unk>.
It's in the category.
The long list of things that we're working on that we think could create even better long term economics for our shareholders.
Is it helping some of the product roadmap that that's coming out for this current NFL season or is that too early and it's more of a 'twenty four 'twenty five event.
Speaker 14: Is it helping some of the product roadmap that's coming out for this current NFL season or is that too early and it's more of a 24-25 event? You know, I-
I think the the.
Speaker 6: There will be some impacts. We've been working on machine learning for a long time and, you know, base level AI. I think some of the advances in what third party tools are out there and available have really hit an inflection point.
There'll be some impacts we've been working on machine learning.
For a long time and <unk>.
Base level AI, I think somebody advantage and what third party tools are out there and available really hitting an inflection point in the last months and.
Speaker 6: in the last month. And I think that's where really the opportunity lies to take it to the next level. But there's things we've been working on in and around this space for years. So there will be some impact.
And I think Thats, where really the opportunity lies to take it to the next level, but there's things we've been working on in and around this space for years. So there will be some impact.
Speaker 6: of the machine learning and AI work in this coming season. But I think some of the really big, more like, you know, things that can kind of fundamentally change the outlook of the business, those are still on the con. Great.
The machine learning and AI work in this coming season, but I think some of the really big.
More like it.
Things that can kind of fundamentally changed the outlook of the business those are still on the comp.
Great. Thanks for taking the questions.
Thank you.
One moment please for our next question.
Speaker 1: One more please for our next question. Our next question will come from the line of Get Kelly of Oppenheimer. Your line is open.
Question will come from the line of Jed Kelly of Oppenheimer. Your line is open.
Hey, great. Thanks, Thanks for taking my question.
Speaker 4: Hey, great. Thanks for taking my question. Two, if I may, are you now just seeing structurally lower cacks just on getting better amortization from your brand spend? And then can you speak to, I know that the product enhancements, but what is keeping players more engaged outside of football? Did some of the merchandising you're doing on the front page or products just can you talk about the engagement trend you're seeing? Thank you.
Two if I may are you now just seeing structurally lower capex just on getting better amortization from your brand spend.
And then can you speak to I know that the product in hand, and enhancements, but what is keeping players more engaged outside of football at some of the.
Merchandising youre doing on the front page or or products. Just kept just can you talk about the engagement trends you're seeing thank you.
Speaker 6: Yes, it's a great question. I think on the cacti.
Yes, so great question I think on the CAC side, it's a combination of several things one certainly what you are mentioning that national scale the brand it.
Speaker 6: It's a combination of several things. One, certainly what you're mentioning, this national scale, the brand, it.
We've built and the leverage we're getting out of that it's also.
Another area of the business, it's constantly being analyzed and optimized we have a team of analytic people. We have machine learning and now we're actually starting to implement AI as a means of helping with things like bidding on PBC platforms. Our creation multiple many multiples more of different types of creative that you can test and optimizing.
Speaker 6: been learning and now we're actually starting to implement AI as a means of helping with things like bidding on PPC platforms or creation of multiple, many multiples more of different types of creative that you can test and optimize in the market. So, that's just a continual thing that we've been doing and I think is going to continue and potentially could be even with some of the AI work that we're exploring in for another sort of step function improvement. But it is what you're saying too, absolutely. I think that there's sort of an underlying advantage that we have in that we have a brand, we have national scale, but then we also have a team that's...
The market.
That's just a continual thing that we've been doing and I think is going to continue and potentially it could be even.
Some of the AI work that we're exploring and for another sort of step function improvement.
Speaker 6: But it is what you're saying to absolutely. I think that there's sort of an underlying advantage that we have and that we have a brand we have national scale But then we also have a team that's really been honing and optimizing the marketing engine
But it is what you are saying two absolutely I think that there's sort of an underlying advantage that we have and that we have a brand we have national scale. But then we also have a team thats really been honing in optimizing the marketing engine unit. It's a complicated thing right. I mean, this is very not straightforward.
Speaker 6: It's a complicated thing, right? I mean, this is very, you know, not straightforward analysis. We're at any given point in time during our peak season.
<unk> analysis, where were at at any given point in time during our peak season spending in so many different places with so many different partners.
Speaker 6: spending in so many different places with so many different partners, so many different creatives in market. So it's really, you know, just the opportunity to just continually optimize an engine like that I think should be a continual tailwind for us for many years to come.
So many different creatives and market. So it's really just the opportunity to just continually optimizing engine like that I think should be a continual tailwind for us for many years to come.
And then on player engagement like Oh right right. So.
Speaker 6: like, oh, right. So, you know, I think the big difference this year was the way that we were able to continue to retain NFL players into NBA season. And that's continued into baseball season as well. Those have both exceeded our expectations.
The Big difference. This year was the way that we are able to continue to retain NFL players into NBA season.
And that's continued into baseball season as well those are both exceeded our expectations. We also have seen excellent cross sell into other game in a robin was asking about that earlier that's continued as we.
Speaker 6: We also have seen excellent cross-sell into eye gaming and Oroppo was asking about that earlier. That's continued as we, you know, it's kind of like this halo effect of when you retain better and cross more people into NBA on the sports side that then has some spillover effect on eye gaming because more active players on the OSB platform cross-sell more into more active players on the eye gaming.
Kind of like this halo effect of when you retain better and cross more people into MBA on the sports side that Dan had some spillover effect, then I gaming because more active players on the OSB platform cross sell more into into more active players on the gaming products.
Speaker 6: product so that's really I think what I would attribute to you to if you look at past years We've typically seen revenue decline Q2 to Q1 We weren't expecting this. I mean this was a result of a huge market share gain year over year Lots of really just you know metrics that for last year and a half We've been testing and really just hit a great point where the optimization is really kicking in
Products. So that's really I think what I would attribute Q2, if you look at past years, we've typically seen revenue decline Q2 to Q1.
Werent expecting this I mean this was a result of a huge market share gain year over year lots of really just metric that for last year and a half we've been testing and really just hit a great point, where the optimization is really kicking in.
Speaker 6: And just the culmination of a ton of good product work. I mean, the product is so much better a year every year from where it was last year. And as I said earlier, I feel like in the back half of the year, we're going to have best product in the market.
And just the culmination of a ton of great product work I mean, the product is so much better year over year from where it was last year and as I said earlier I feel like in the back half of the year, we are going to have the best product in the market.
Speaker 3: Yeah, I think all the work we do in that for retention or sport to sport cross-cell, however, however you want to think about it, you got to cross-cell them, but most importantly, the product's got to be great. When you're bringing NFL player into NBA, or an NBA player into MLB, and we're just super proud of how strong both our NBA product and MLB product improved on a year of your basis. Thank you, good quarter.
Yes, I think thank you Ken.
I think all the work we do in that.
Port retention or sort of support cross sell however, you want to think about it you've got to you got to cross sell them, but most importantly, the products got to be great. When youre, bringing NFL player into NPA or an NBA player in the MLP and we're just super proud of how strong both our NDA product and there will be product improved on a year over year basis.
Thank you good quarter.
Thank you.
Thank you.
One moment please for our next question.
Yes.
Okay.
Our next question will come from Michael Graham of Canaccord. Your line is open.
Speaker 1: Next question will come from Michael Graham or Ken Accord. Your line is open.
Thanks, a lot and yes awesome quarter, guys I wanted to ask on the.
Speaker 20: Thanks a lot and yeah, awesome quarter guys. I wanted to ask on the growth outlook for the rest of the year, can you maybe deconstruct that from the perspective of the advantages of your states, like how much of the growth you think is gonna come from some of your newer states versus more established ones. And related to that, just maybe a layer of depth into how you layered the launch of Kentucky into your outlook for Q3.
On the growth outlook for the rest of the year can you maybe deconstruct that from the perspective of the vintages of your states like how much of the growth you think is going to come from some of your newer states versus more established ones.
Related to that just.
Maybe a layer of depth into how you layered the launch of Kentucky into your outlook for Q3.
Speaker 6: Absolutely. So definitely, you know, the bulk of the growth is going to come from the states that we We've been working this hospital, we're working ina
Absolutely so definitely the bulk of the growth is going to come from the states that we launched.
Speaker 6: from 2018 to 21. We are starting to get some real good contribution from some of the 22 states as well, but I think the degree to which we are still seeing growth in our older state, it's just very significant and they're obviously a bigger piece of the pie. So when you can get that kind of growth in your older states, it makes it very big and packed on the overall business.
From 2018 through 21, we are starting to get.
Some real good contribution from some of the 22 states as well, but I think.
The degree to which we are still seeing growth in our older state.
And so it's very significant and there are obviously a bigger piece of the pie. So when you can get that kind of growth in your older States. It makes it very very big impact on the overall business.
And then I'm sorry, what was the second part of the question, Kentucky, Kentucky, Kentucky, Kentucky, I think we've got a slide on that but we're projecting roughly.
Speaker 6: and then I'm sorry, what was the second part of the question? Kentucky. So Kentucky, I think we had a slide on this, but we're projecting roughly 20, we're expecting I should say 20 million of revenue and 30 million ebit to loss.
We're expecting I should say $20 million of revenue and $30 million EBIT a lot.
Speaker 6: from Kentucky in fiscal year 23. And, you know, I think that assumes a September 28th launch date. Last time when we guided, we did not actually have a clear launch date for Kentucky and now that we do, we put it into the guides.
From Kentucky and in fiscal year 'twenty three.
And I think that that assumes at September 28 launch date.
Last time, when we guided we did not actually have a clear launch date for Kentucky and now that we do we put it into the guidance.
Okay.
Speaker 6: And I'll note that, you know, despite that not being in our prior guide, and now being in our current guide, we still had a massive improvement in the guide. So, you know, that shows that not only can we fund new state launches through the results that we're generating old states. And the cost efficiencies we're finding, but we can do that and continue to see upside on top of that. Which is a great story, I think, from years past where we always had to kind of increase the loss outlook every time that we've had a new state launch.
I will note that.
Might that not being in our prior guide and now being in our current guide we still had a massive improvement in the guide so that shows that not only can we fund new store.
Date launches through the results that we're generating allstate and the cost efficiencies, we're finding but we can do that and continue to see upside on top of that which is a great story I think from years past, where we always had to kind of increase the loss outlook every time that we've had a new state launch.
Excellent. Thank you.
Thank you.
One moment please for our next question.
Speaker 1: One moment, please, for our next question.
Yeah.
Our next question will come from Brent Montara.
Speaker 1: Next question will come from brand Montour of Barplease. Your line is open.
Of Barclays. Your line is open.
Speaker 4: Hey, good morning everybody, just one for me. So back to the same game, Parlay, enhancements for the upcoming NFL season. Sounds like you're pretty confident chasing that product going to be...
Hey, good morning, everybody just one for me.
Back to the <unk>.
Same game parlay enhancements for the upcoming NFL season, it sounds like you're pretty confident chasing that product is going to be.
Speaker 4: The best as you call it I guess you know, it sounds like you baked in higher holds for this. It sounds like you baked in higher retention
The best.
As you call. It I guess it sounds like you've baked in higher holds for this it sounds like you've baked in higher retention and no share gains if im reading.
Speaker 4: and no share gains if I'm reading your comments correctly. I guess the question is, you know, are the bright enhancements?
Your comments correctly I guess the question is are the product enhancements differentiated enough.
Speaker 4: differentiated enough that it could be a driver of market share. Or, you know, is it the kind of thing where you would have to go out and get people to flip from your main competitor to try it? How does the mechanics work of gaining share off something like that?
It could it could be.
A driver of market share.
Or is it the kind of thing, where where you would have to go out and.
And get people to to flip from your main competitor to try it how does the mechanics work of gaining share off something like that.
No.
Speaker 6: You're right, it's a combination of two things that could be actual wallet that was going to your competitors, customers that were using your competitors before, or it could simply be just better engagement and monetization of customers on your platform. I think what we felt like in Q2, it was a combination of both.
Youre right. It is a combination of two things that could be.
Actual wallet.
And your competitors' customers that were using your competitors before or it could simply be just better engagement and monetization of customers on your platform.
What we felt like in Q2, it was a combination of both.
Speaker 6: Definitely being able to increase whole rate year over year made a big difference in share. But it was a combination of both. We think we got Handle Share from people that were playing MBA with competitors last year as well.
Definitely it being able to increase whole rate year over year made a big difference in share, but it was a combination of both we think we got handle share from.
People that were putting MDA with competitors last year as well.
Speaker 6: I think that's really a result of just the product improvement year-rear. So, to answer your question, absolutely, could there be upside-yes in you?
I think thats really a result of just the product improvement year over year. So to answer your question absolutely could there be upside yes.
Speaker 6: You know, the goal for the team is to go out and beat anything that we put out there. And I think that we feel like we have quite a few initiatives that could help us gain share and could help us further retain and engage and monetize our youth.
The goal for the team to go out and beat anything that we put out there and I think that we feel like we have quite a few initiatives that could help us gain share and could help us further retain engage and monetize our users and in the back half of the year.
Speaker 6: the back half of the year, we just consistently take an approach of not putting things that we don't feel. We have a whole line of sight to, you know, to in the guide, our guide we consider to be what we commit to. And then we go out, we try to deliver above that by executing better and, you know, hopefully some of the things that you hope come through come through, but we don't put hope in the guide. We put what we know in the guide. Q. Thanks for the comments. Congrats on the Porter.
We've just consistently taken approach of not putting things that we don't feel we have full line of sight.
Two in the guide our guide we consider to be what we commit to.
And then we go out we try to deliver above that by executing better.
Hopefully some of the things that you hope come through come through but we don't put hope in the guide we put what we know in the guide.
Great. Thanks for the comments congrats on the quarter.
Thank you.
Thank you.
Okay and one moment please for our next question.
Yes.
Our next question will come from Stephen <unk> of TD Cowen Your line is open.
Speaker 1: Next question will come from Stephen Geogola of Titi, Calvin, Yolani's open.
Alright, thanks for the question.
Speaker 7: Thanks for the question. I mean, I've did it implied second half guidance and quarterly cadence versus your prior guide. Could you just walk us through your assumptions for the greater implied EBITDA upside to Q3 versus Q4, particularly in light of the Kentucky launch and favorable sport outcomes in Q3 last year, and also just what are the whole percentage rates you're assuming for Q3 and Q4? Thanks.
On the updated implied second half guidance and quarterly cadence versus your prior guide could you just walk us through your assumptions for the.
Greg or implied EBITDA upside to Q3 versus Q4, particularly in light of the Kentucky launch and favorable sport outcomes in Q3 last year and then also just what are the hold percentage rates youre, assuming for Q3 and Q4.
Thanks.
Speaker 6: Thank you, yeah. So we're assuming a similar whole rate to what we had in the back half of last year. I think for the Q3, Q4 question, Kentucky definitely made a little bit of a difference, but the fact that we were able to increase the guy for the back half of the year increased the Q4.
Thank you, yes, so we're assuming a similar rate to what we had in the back half of last year.
I think for the Q3 Q4 question, Kentucky definitely made a little bit of a difference.
But the fact that we were able to increase the guide for the back half of the year increased the Q4 guide I think really had to do with just the overall performance of the existing states that we're in and of the overall business on the cost efficiency side, and I think that thats more than enough to offset the Kentucky.
Speaker 6: God, I didn't really had to do with just the overall performance of the existing states that were in and of the overall business on the cost efficiency side. And I think that that's more than enough to offset the Kentucky EBITDA that we're negative EBITDA that we're expecting to generate in the back after the year. So we're pretty optimistic about a really great second half.
EBITDA.
Negative EBITDA that we're expecting to generate in the back half of the year. So we're pretty optimistic about our really great second half.
Speaker 6: You know, I think we'll have to see exactly what ends up happening with states like North Carolina and Vermont, but right now we feel like Kentucky is going to provide a great opportunity for us.
I think we'll have to see exactly what ends up happening with states like North Carolina, and Vermont, but right now we feel like Kentucky.
I'm going to provide a great.
Opportunity for us to go and invest in acquiring customers in our existing states and there is also several new state.
Speaker 6: go and invest in acquiring customers and then our existing states. And there's also several new states that haven't had a full NFL season. Massachusetts hasn't had any NFL season, Ohio didn't launch until January last year. So there should be a lot of upside and the customer acquisition numbers and they and in each to this.
I haven't had a full NFL season, Massachusetts, Hasnt had any NFL season, Ohio didn't launch until January last year. So there should be a lot of upside and I think the customer acquisition numbers.
And each two this year.
Speaker 7: Jason, just one more if I can. And lighted the Ohio move to double its tax rate. Could you maybe just discuss the long-term rest to your business and state governments would look to, you know, take increasing taxes on gross gaming revenue and sort of what are the incentives that would keep state governments maintaining lower tax rates?
Hey, Jason just one more if I can in light of the Ohio move to double its tax rate could you maybe just discuss the.
The long term risk to your business and state governments would look to take increase in taxes on gross gaming revenue.
What are the incentives that would keep state governments, maintaining lower tax rates.
Speaker 6: Yeah, you know, I think it's a great question, obviously, disappointing to see, but, you know, I think most state governments understand that if you start taxing this too high, you kind of defeat the purpose because it makes it really impossible for the legal regulated operators to compete with the illegal offshore operators that are not paying art. Some of them on shore now. They're not paying taxes that are not following regulation.
Thank you, yes, I think it's a great question, obviously disappointing to see but I.
I think most state governments understand it if you start taxing is too high you kind of defeat the purpose because it makes it really impossible for the legal regulated operators to compete with the illegal offshore operators that are not being all right some of them onshore now.
They are not paying taxes that are not following regulation.
Speaker 6: You know, there is, I think, great awareness of that in state legislatures.
There is I think great awareness of that and state legislatures.
Speaker 6: So, you know, I'm optimistic that states are going to keep taxes at a reasonable level. I think that they understand that they're ultimately going to drive volume back into the illegal market if they try to tax the industry too heavily. Thanks, sir.
So im optimistic that.
States are going to keep taxes at a reasonable level I think that they understand that they are ultimately going to drive volume back into the illegal market. If they tried to attack the industry too heavily.
Thanks, Jason.
Thank you.
One moment please for our next question.
Our next question will come from Robert Fishman of Moffett Nathan Your line is open.
Speaker 1: Next question will come from Robert's fisherman of Mothard, Nathanson. So the line is open. Hi, good morning guys. Um.
Hey, Good morning, guys two questions on partnership first ahead of the NFL kickoff can you help us understand how the Amazon Thursday night football partnership healthcare business last year, and whether there are more opportunities to build upon that success. This year and then anything you can share on how the ESPN partnership has been a <unk>.
Speaker 22: First, ahead of the NFL kickoff, can you help us understand how...
Speaker 22: Amazon Thursday night football partnership helped your business last year and whether they're more opportunities to build upon that success this year and then anything you can share on how
Speaker 22: ESPN partnership has been a driver of your strong upgrowth or overall business.
Driver of your strong mask growth or overall business and would you be willing to expand your ESPN partnership depending on which direction Disney ends up going with the strategic review.
Speaker 22: And would you be willing to expand your ESPN partnership, depending on which direction Disney ends up going with its strategic view?
Speaker 6: Yeah, so Amazon has been a great partner. Last year we were really happy with Thursday night football results. It was a big driver of customer acquisition for us. Those games are also really well built for seeing game parlay offerings.
Yeah. So Amazon has been a great partner last year, we were really happy with Thursday night football results.
The big driver of customer acquisition for US those games are also really well built for seeing game parlay offerings. So really helped drive a lot of parlay mix through better promotion is being gained parlays on Thursday night, and we have a few extra things that we're going to be doing with Amazon. This year that we're pretty excited about that will be I think.
Speaker 6: really helped drive a lot of parlay mix through better, you know, promotion of thing game parlay on a Thursday night.
Speaker 6: And we have a few extra things that we're going to be doing with Amazon this year that I'm pretty excited about that will be.
Speaker 6: I think coming, you know, coming to everybody.
Come in coming to everybody.
And do order when the season launches, so really should be a great year with Amazon and we're really just thrilled with that partnership and as far as ESPN goes.
Speaker 6: do order once the season launches. So really should be a great year with Amazon and we're really just thrilled with that partnership. And as far as the SPN goes, same story, we've been really happy with them as a partner. They've been great. We continue to get great value out of that relationship. And...
Same story, we've been really happy with them as a partner they've been great. We continue to.
Get great value out of that relationship.
Speaker 6: You know, we'll have to see. I think obviously we saw the same comments everybody else did from Bob Eiger and
We'll have to see I think.
Obviously, we saw the same comments everybody else did from Bob Iger and.
Speaker 6: You know, I think it's still fairly early days for them, but, you know, I don't wanna speak for them, they'll know better than I am, than I will what their plans are, but we're always happy with, you know, great partners like ESPN, if there's a way to have a deeper relationship that makes sense for both companies and, you know, something we would certainly consider. And...
I think it's still fairly early days for them, but.
I don't want to speak for them. They will know better than I am then what their plans are but we.
We're always happy with Great partners like ESPN, if theres a way to add deeper relationship. It makes sense for both companies and it's something we would certainly consider and.
Speaker 6: If it doesn't make sense and there's something that you know
If it doesn't make sense and there is something that.
Doesn't really work for us or for them then we won't we're perfectly happy with the relationship as it is now so I think that's how we're thinking about it.
Speaker 6: doesn't really work for us or for them then we won't. We're perfectly happy with the release of the beds it is now. So I think that's how we're thinking about it.
Great. Thank you Jason.
Thank you.
Speaker 1: One moment please for our next question. Our next question will come from the line of Ryan Sikal of Craig Hallam Capital Group. Your line is open.
One moment. Please for our next question next.
Next question will come from the line of Ryan <unk> of Craig Hallum Capital Group. Your line is open.
Speaker 13: Good morning guys, just one for us. You mentioned MLB has been a positive surprise. They're a specific product that's resonating better with the player, whether it be live, team game, parlay, et cetera.
Good morning, guys just one for US you mentioned MLP you. It's been a positive surprise there specific product that's resonating better with the player whether it be live same game parlay et cetera.
Yes, I think first of all MLP itself has made some great changes that have helped increased engagement with the sports they give them credit for that.
Speaker 6: Yeah, I think first of all, MLB itself has made some great changes that have helped increase engagement with the sports. They give them credit for that. But, you know, I think betting has helped a lot too. And MLB, first of all, is very well built for live betting. So that's been a real product that works very well with that sport. And we're excited about the offering we have there this year.
But.
Bedding has helped a lot.
MLB first of all it's very well built for live betting.
That's been a real product.
That works very well with that sport and we're excited about the offering we have there. This year also the same gain parlay product has been significantly enhanced this year, we brought our own models into the fold and I think.
Speaker 6: Also, the same game parlay product has been significantly enhanced. This year we brought our own models into the fold and I think really just improved both the UI and the overall offering of same game parlay for MLB. And there's been a number of other things we've done. We've done some work on the cash out feature. I mean, there's a lot of different areas that we've worked on that I think have really helped improve the MLB.
Really just improve both the UI and the overall offering obtained game parlays, Brad and I'll be.
And theres been a number of other things we've done we've done some work on the cash out feature I mean, there's a lot of different areas that we worked on that I think has really helped improve the MLP offering year over year.
Speaker 6: offering you over a year and that combined with really strong engagement from a viewership perspective I think is driven unexpectedly positive to the upside results for MLB season so far. Thank you, some extra guys.
That combined with really strong engagement from a viewership perspective, I think is driven unexpectedly positive to the upside results for MLB season, so far.
Thanks, Jason Nice job guys.
Thank you.
Thank you.
One moment. Please next question.
And our next question will come from Barry Jonas of Twist. Your line is open.
Speaker 1: And our next question will come from Barry Jonas of Truth. Your line is open.
Speaker 20: Hey guys, you've really previously given some advice on how to think about NFL results and corresponding holds. Last year it correlated, maybe a little laps with the season went on. Just curious as we head into football season, if there's anything you can give us to help think about, sort of, that week to week success.
Hey, guys, you've previously given some advice on how to think about NFL results and corresponding hold last year correlated maybe little less with the season went on just curious as we head into football season. If theres anything you can give us to help think about sort of that week to week success.
Speaker 6: Yeah, I think it's very similar to what we had shared last year that the results can definitely range between negative 10 and probably positive 20%.
Yes, I think it's very similar to what we had shared last year that.
The result can definitely ranged.
<unk> negative 10, and probably positive 20% dip.
Speaker 6: depending on you know if you've really taken like that 95% confidence interval it can get that wide and any given week obviously over the course of several weeks over the course of the season that not been tightened but that's how I would think about kind of a week to week thing and
Depending on if you're really taken like that 95% confidence interval it can get that wide.
In any given week, obviously over the course of several weeks over the course of the season that band Titans, but that's how I would think about kind of a week to week thing.
Speaker 6: You know, really it's the results generally in NFL of two things. One, you know, do the favorites, win or lose. And second is how the player props do. And that second part is becoming increasingly important as, you know, the industries evolve because so much betting is now happening on player props and so much thinking in Parley depends on player props. So that's really made a big difference.
Really it's a result generally an NFL two things one do the favorites win or lose.
Second is how the player props do and that second part has become increasingly important as the industry has evolved because so much betting is now happening on player props and so much name game parlay depends on player props. So that's really made a big difference.
Speaker 6: You know, I think given Q3 is always one day.
I think given Q3 is always one that.
Speaker 6: For our business planning group, it's their least favorite quarter because
For our business planning group it could at least favorite quarter, because so much volume comes in the last three weeks of the quarter.
Speaker 6: so much volume comes in the last three weeks of the quarter and
Speaker 6: You know not that it's you know the only thing going on but like relatively speaking
Not bad.
It's the only thing going on but like relatively speaking.
Speaker 6: July and August are slower months. So it's really the last few weeks to get all of the NFL volume. And a few good or bad weeks can definitely swing the results a little bit. But I think that as we've gotten bigger and our customer base has become more diversified, the effects of that are lower as we've gotten more of a mix of player parlay. So it's not just straight game outcomes.
July and August are slower months. So it's really the last few weeks to get all of it the NFL volume in a few good or bad weeks indefinitely swing the results a little bit, but I think that as we've gotten bigger and our customer base has become more diversified the effects of that are lower as we've gotten more of a mix of player parlay. So it's not just straight game outcome that.
Speaker 6: You know, so I think we're have to look at this season. I think this year we might see a little bit tighter fans, certainly over three weeks we will, but I think still fair, given what we know today, I think week to week about a, you know, that minus 10 to plus 20% possibility on hold, depending on the game outcomes and player parlay out.
So I think we're at.
To look at this season I think this year, we might see a little bit tighter band certainly over three weeks, we will but I think still fair given what we know today I think week to week about that minus 10 to plus 20% possibility on hold depending on the game outcomes and play a part of the outcomes.
Speaker 17: That's also interesting. Quick follow up wanted to get your thoughts on Florida, given the recent court decision. Do you see a pathway for drafting to compete in the state?
That's helpful. And then just a quick follow up wanted to get your thoughts on Florida, given the recent court decision do you see a pathway for draft kings to compete in the state.
Speaker 6: You know, I think too early to tell what the path is, but I'm optimistic there'll be a pathway there because I think people in Florida want great products.
I think too early to tell what the path is.
Im optimistic there'll be a pathway there because I think people in Florida want great products and so I do think it will get figured out but right now.
Speaker 6: I do think that it'll get figured out, but right now, I think it's really hard to say there's still going to be...
It's really hard to say there is still going to be a few steps to play out in a few things court rulings.
Speaker 6: a few steps to play out and a few, you know, things with chord rulings and other things.
And so.
Speaker 6: You know, it's really at this point a little bit murky and, you know, I think we'll know a lot more in the coming months. Great. Congrats on the quarter.
It's really at this point, a little bit murky and.
I think we'll know a lot more.
In the coming months.
Great Congrats on the quarter.
Thank you.
Thank you.
And one moment for our next question.
Our next question will come from Jordan Bender of JMP Securities. Your line is open.
Speaker 1: Our next question will come from Jordan Bender of JMP Securities. Your line is open.
Great. Thanks for taking my question. So you gave comment on where your <unk> margin could potentially go over time more of a wait and see but well maybe ask just on the MGR emerging side still international markets.
Speaker 14: Great, thanks for taking my question. So you gave comments on where your GGR margin could potentially go over time, more of a wait and see, but maybe I'll just on the NGR margin side, that still lags international markets. Just given the partly myths, can we maybe exceed 10 to 12% NGR margins that we see in the international markets?
Just given the partly mix can we may be exceed 10% to 12% and <unk> margins that we see in the international markets.
Yes.
Yes, I think at this point, we have no reason to believe that we can't get to the team sort of MGR margin that we see internationally, but obviously, it's still early it's still early days here. So let's see how it plays out but given the fact that we've over the last couple of years continued to optimize the whole.
Speaker 6: You know, I think that at this point we have no reason to believe that we can't get to the same sort of NGR margins that we see internationally, but
Speaker 6: Obviously, there's still early days here. So let's see how it plays out. But given the fact that we've over the last couple of years continued to optimize the whole rate, continued to optimize the promo mix, and we've actually seen better customer engagement, better retention.
<unk> continued to optimize the promo mix and we've actually seen better customer engagement better retention.
Speaker 6: You know, I'm pretty optimistic and have no reason to believe that we can't reach similar type of numbers that you're talking about that more mature markets across the globe have been able to.
Yes, I am pretty optimistic and have no reason to believe that we can't reach the similar type of numbers that youre talking about that more mature markets across the globe have been able to get to.
Great and then just on the follow up you called out some states that have legalized, but not launched yet.
Speaker 14: Great. And then just on the fallup, you called out some states that have legalized but not launched yet. You know, a market that we don't talk about is Nevada. Is there any interest from draft king to go into that state at any 20 time? Yeah, we're done.
That we don't talk about as Nevada is there any interest from draft Kings to go into that state at any point in time.
Yeah, we are definitely interested I mean.
Speaker 6: You know, Nevada is obviously an important state for gaming. There's a robust sports setting market there. It is in-person registration, so...
That is obviously an important day for gaming.
Our sports betting market there it is in person registration so.
Speaker 6: I would temper any expectations for the possible contribution there, but I do think it's an important state because...
Temporary any expectations for the possible contribution there, but I do think it's an important date because.
Speaker 6: You know, people go there who are customers and they want to be able to make that. And so I think being able to give them that option as well as to be able to access the Nevada that are now betting with, you know, others and I think would like to try drafting's product is definitely something that works well in. Great, nice quarter. Thank you.
People go there who are our customers and they want to be able to make bets and so I think being able to give them that option as well as to be able to access it.
In Nevada that are now betting with others and I think we'd like to try drafting product is definitely something that we're exploring.
Great nice quarter.
Thank you.
Thank you.
And one moment please for our next question.
Speaker 1: Next question will come from Jeff potential of stefl. Your line is open Hey, good morning everyone. Thanks for taking our question tonight
Our next question will come from Jeff potential of Stifel. Your line is open.
Hey, good morning, everyone. Thanks for taking my question and nice quarter.
Question is on the continued structural hold rate expansion. It seems that a lot of time has been talking about the parlays and the impact on mix, but maybe not as much on the optimized trading and risk management improvements you guys have made can you just unpack this a bit more for us I guess are there specific that type of sports where have you been.
Speaker 14: is on the continued structural hold rate expansion. You know, it seems that a lot of time is spent talking about the parlays and the impact on MIX, but maybe not as much on the optimized trading and risk management improvements you guys have made. Can you just unpack this a bit more for us? I guess are there specific bet types or sports or you've been getting better at minimizing these trading inefficiencies? And...
We're getting better at minimizing these trading inefficiencies and how do you think about further upside here are there any comps you would point to or perhaps youre tracking.
Speaker 14: How do you think about further upside here? Are there any comps you would point to or perhaps you're tracking and even better spread between call of the underlying vague and the real edge hold rates? Thanks.
Even better spread between call it the underlying vegan and the realized hold rates. Thanks.
Speaker 6: Very good question. I think you're absolutely right that we've talked and everybody's talked a lot about Parlay Mix and Average like Countless are certainly very important drivers of whole rate improvement. But there is also, you know, the, there are also the other levers that you mentioned. I would say that really across the board, we feel we've improved. In fact,
Very good question I think youre, absolutely right that we've talked and everybody has talked a lot about partly mix and average like count and those are certainly very important drivers of whole rate improvement, but there is also.
There are also the other levers that you mentioned I would say that really across the board. We feel we have improved and in fact, the Q2 outperformance is really more a function of those other things that you mentioned because parlay mix, even though his way up year over year was kind of on track with our expectations. So it was really a customer risk management the trading improvement.
Speaker 6: You know, the Q2 out performance is really more a function of those other things that you mentioned because Parley Max, even though it was way up year over year, was kind of on track with our expectations. So it was really a customer risk management, the trading improvement.
Yeah.
Speaker 6: We've spent a lot of dev effort on tooling for our traders to make it easier for them to adjust lines, soft soft lines to move them faster and to better optimize them. We've also really significantly invested in our modeling and approach for customer risk management. So I think those are things that are really paying off as well as you look at the whole rate improvement and the outperformance in Q2. So, I'll go back to you. Thank you.
We've spent a lot of dev effort on tooling for our traders to make it easier for them to adjust lines bots offline to move them faster and better optimize them. We've also really significantly invested in our modeling approach for customer risk management.
So I think those are things that are really paying off as well if you look at the whole rate improvement and the outperformance in Q2.
Yeah.
Thanks, Jason.
Thank you.
Thank you.
And one moment please for our next question.
Okay.
Speaker 1: Next question will come from the line of John Decree of CBRE Securities. Your line is open. Good morning Jason Jason. Thanks sir.
Our next question will come from the line of John Decree of CB Army Securities. Your line is open.
Good morning, Jason Jason Thanks for taking all the questions.
Speaker 9: Maybe one back to the roots on DFS, I know much smaller piece of the business now, but I was wondering if you could, you know, give us a little insight as to how that business is trending in the context of customer acquisition. So as you enter new states, are you still getting a similar kind of initial cross sell out of DFS that you did?
Maybe one back to the roots on DFS I know much smaller piece of the business now, but I was wondering if you could give us a little insight as to.
How that business is trending in the context of customer acquisition.
So as you enter new states or are you still getting the similar kind of initial cross sell out of PFS that you did maybe two to three years ago and you're in your older Vintage States and then is TFS still.
Speaker 9: maybe two to three years ago in your older vintage states and then is the FF still kind of an ongoing tool in those older vintage states where he's still acquiring customers via TFS first.
Kind of an ongoing tool in those older vintage stage III still acquiring customers via TFS first.
Absolutely I mean, thats actually has had a great year so far.
Speaker 6: Absolutely. I mean, DSF actually has had a great year so far. And, you know, that's been driven by a lot of improvements we've made across the product. That's all. I've seen a big jump year over year, and that's something that you can sort of use as a little bit of a litmus test for, or maybe an advanced test for how NFL season's going to go, because a lot of those drafts happen in the July off its time frame.
And that's been driven by a lot of improvements we've made across the product basketball has seen a big jump year over year, and that's something that you can sort of use it.
A little bit of a litmus test for.
Maybe it advanced test for how NFL season is going to go because a lot of those that happen in the July August timeframe. So very exciting year for DFS. We have some really good that plan for the back half of the year on that product and it is continually adding new customers. We have seen really strong crossover continue from DFS when we launch new state.
Speaker 6: So very exciting year for DFS. We have some really good stuff planned for the back after the year on that product. And it is continually adding new customers. We have seen really strong crossover continue from DFS when we launched new state. So everything seems to be working on that front and it continues to be a big source of engagement for customers.
So everything seems to be working on that Brian and it continues to be a big source of engagement for our customers.
Speaker 6: States that don't have sports betting as well as a great funnel for a new state that wants.
Don't have sports betting as well as a great funnel for.
Our new states that launch.
Thanks, guys and I think I think you answered my follow up in there, but just to ask it explicitly.
Speaker 9: And I think you answered my follow up in there, but just to ask it explicitly, customers that cross over from DFS to sports and or eye gaming, are they still retained as DFS? So you're seeing customers play, going back and forth still, or what happens when they cross over to OSB? Do they kind of reduce their time on DFS? Are you still seeing multi-product use across the customer base?
Customers that that crossover from TFS to sports <unk> gaming are they still retained as DFS, so youre seeing customers play.
Ill go back in for still or whats the what happens when they crossed over to OSB do they do they kind of reduce their time on DFS or are you still seeing.
Multi product use across the customer base.
Speaker 6: Oh, definitely seeing multi-product use. I mean, there's some cannibalization, of course, but it's not very significant, B.
Oh definitely seeing multi product I mean, there is some cannibalization of course, but it's not very significant.
Speaker 6: The products are pretty different and people like them for different reasons.
The products are pretty different and.
People like them for different reasons.
Speaker 6: People also are not spending a ton of money on DFS, so it's really not like a big wall of thing to, you know, it's more of an engagement thing.
<unk> also are not spending a ton of money on DFS. So it's really not like a big wallet thing to.
It's more of an engagement thing.
Speaker 6: And they are different products and I think that they they provide different types of experiences for people. So we are seeing a great deal of crossover but we're also seeing great retention across all those products as well.
And they are different products and I think that they provide different types of experiences for people. So we are seeing.
Great deal crossover, but we're also seeing great retention across all of those products as well and it appears that cannibalization is fairly minimal on a lot of it also happens in the initial launch stages people are very excited about sports betting maybe forget about DFS for a little bit, but what we're seeing in some of our older State vintages is as time goes on.
Speaker 6: It appears that the cannibalization is fairly minimal. And a lot of it also happens in the initial launch stages. People are very excited about sports betting. They maybe forget about GFS for a little bit. But we're seeing some of our older state vintage.
Speaker 6: is as time goes on, they come back and some of the cannibalization, even though it wasn't that significant to begin with, even that small bits of cannibalization were seeing reverse in some of our roles.
Come back in.
Some of the cannibalization, even though it wasn't that significant to begin with even that small bits of cannibalization, we're seeing reverse in some of our older state.
Speaker 9: Great, I appreciate that Jason and Doug, congratulations on a fantastic quarter. Thank you so much.
Great I appreciate that Jason and congratulations on a fantastic quarter.
Thank you so much.
Thank you.
And this will end the Q&A session I would now like to turn the conference back to Jason Robins for closing remarks.
Speaker 1: And this will end the Q&A session. I would now like to turn the conference back to Jason Robbins for closing remarks.
Thank you all for joining us on today's call. We had an excellent first half of 'twenty. Three we are laser focused on the back half and on the fall and we're very excited about the rest of the year and beyond I look forward to speaking with you over the next few weeks and hope you all stay safe and well. Thank you.
Speaker 6: Thank you all for joining us on today's call. We had an excellent first half of 23. We are laser focused on the back half and on the fall. And we're very excited about the rest of the year and beyond. I look forward to speaking with you over the next few weeks and hope you all stay safe and well. Thanks.
This concludes today's conference call. Thank you all for participating you may now disconnect.
Speaker 1: This concludes today's conference call. Thank you all for participating. You may now disconnect, have a present day, and enjoy your weekend.
A pleasant day and enjoy your weekend.