Good day, and thank you for standing by. Welcome to the DraftKings Q3 2023 earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stanton Dodge, Chief Legal Officer. Please go ahead. Good morning, everyone, and thank you for joining us today. Certain statements we make during this call may constitute forward-looking statements that are subject to risks, uncertainties, and other factors, as discussed further in our SEC filings, that could cause our actual results to differ materially from our historical results or from our forecasts. We assume no responsibility to update forward-looking statements other than as required by law. During this call, management will also discuss certain non-GAAP financial measures that we believe may be useful in evaluating DraftKings' operating performance. These measures should not be considered in isolation or as a substitute for DraftKings' financial results prepared in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings release and presentation, which can be found on our website, and in our quarterly report on Form 10-Q, filed with the SEC. Hosting the call today, we have Jason Robins, Co-Founder and Chief Executive Officer of DraftKings, who will share some opening remarks and an update on our business, and Jason Park, Chief Financial Officer of DraftKings, who will provide a review of our financials. We will then open the line to questions. I will now turn the call over to Jason Robins. Good morning, and thank you all for joining. The first three quarters of 2023 have been outstanding for DraftKings. We have made thoughtful investments in our product throughout the year and are winning with our customers, and our team executed tremendously around the start of NFL and college football season. Importantly, we remain focused on our core value drivers: acquiring customers efficiently, retaining and monetizing our existing customers, entering new jurisdictions, and building an efficient and scaled organization. I'm pleased to share that this strong execution and focus resulted in another excellent quarter. Revenue and Adjusted EBITDA exceeded our expectations, and our momentum continued into the Q4 with the start of the basketball and hockey season. We are raising our expectations for fiscal year 2023 and introducing initial guidance for fiscal year 2024. In 2024, we expect revenue of $4.5 billion-$4.8 billion and positive Adjusted EBITDA of $350 million-$450 million. We also expect to generate meaningfully positive free cash flow in fiscal year 2024. As we look back on the Q3 in 2023, here are our key takeaways. First, we are winning. Our revenue in the quarter increased 57% year-over-year, and we achieved No. 1 combined OSB and iGaming gross gaming revenue share in the U.S. We've efficiently added over 1,000 basis points of combined OSB and iGaming shares since the Q2 of 2022, which we are very proud of. Second, our investments in product and technology are paying off. We have created what we believe is the strongest product in the industry and are seeing overall engagement on our app and structural hold percentage continue to increase. Importantly, we have a clear roadmap to extend our product advantage over the coming years. Third, our older states are generating significant contribution profit, and newer states are generating positive contribution profit faster than previous states. Fourth, we expect attractive Adjusted EBITDA flow-through percentage on incremental revenue as we believe our organization is largely at scale and therefore has a long runway of margin improvement. Finally, the best is yet to come. We are excited for the future and look forward to presenting our latest views on the U.S. opportunity, sources of competitive differentiation, core business drivers, including additional details on unit economics and our multi-year financial outlook at our Investor Day on November 14th. With that, I will turn it over to Jason Park. Thank you, Jason. I'll hit the highlights, including our very strong Q3 performance, increased 2023 guidance, and our initial expectations for 2024. Please note that all income statement measures discussed, except for revenue, are on a non-GAAP Adjusted EBITDA basis. As Jason mentioned, the organization is executing very well, and that is showing up in our results. We achieved $790 million of revenue in the quarter, which is 57% higher than our Q3 2022 revenue, and our Adjusted EBITDA of -$153 million improved by $111 million on a year-over-year basis. Customer retention and engagement far exceeded our expectations as customers enjoyed our live Same Game Parlay offering as well as our live and player prop markets. MLB was a bright spot throughout the Q3, and we successfully transitioned many of those customers into the football season. Customer acquisition was also healthy and exceeded expectations. For example, we have already acquired more than 5% of the adult population in Kentucky following the launch of our Sportsbook product in that state on September 28th. Structural hold was above 9.5% during the quarter and well ahead of expectations as we continued to improve our parlay mix and optimize our trading capabilities. Our actual Sportsbook hold percentage was approximately 9%, inclusive of customer-friendly sport outcomes, primarily in college football and the NFL. Promotional reinvestment, as a percentage of GGR, outperformed our expectations due to stronger-than-anticipated retention of existing customers, which resulted in a slightly higher mix of existing customers versus new customers. Promotions as a percentage of GGR continued to improve on a year-over-year basis for our OSB and iGaming states. Our adjusted gross margin was in line with expectations and increased almost 300 basis points year-over-year. Strong handle growth, combined with improving structural sportsbook hold rates and better promotional reinvestment for OSB and iGaming, contributed to higher adjusted gross margin. External marketing and fixed expenses were consistent with our plans as we executed our football season kickoff and continued to exert discipline against our compensation expenses and vendor-related costs. We're very pleased with our results in our more mature OSB and iGaming states. In the states that launched from 2018 through 2021, we continued to drive very strong handle and revenue growth year-over-year, with a corresponding improvement in adjusted gross margin rate, while our external marketing costs decreased at a double-digit rate. Our strong Q3 results and our visibility into continued improvement have enabled us to significantly raise our expectations for 2023 revenue and adjusted EBITDA. We are improving our full year 2023 revenue guidance range to $3.67 billion-$3.72 billion, or by $195 million at the midpoint. We are also improving our full year 2023 adjusted EBITDA guidance range to -$95 million-$115 million, or by $100 million at the midpoint. The bridge from the 2023 revenue and Adjusted EBITDA guidance that we shared in August to our 2023 guidance as of today includes stronger customer retention, acquisition, and engagement, and structural sportsbook hold improvement, partially offset by customer-friendly sport outcomes in the Q3 and our expected launch in May. You can see the details of the bridge in the earnings presentation we posted to our website. In terms of our full year, we are increasing our 2023 adjusted gross margin rate guidance to 43.5%-45%. We now expect contribution profit, which we define as adjusted gross profit less external marketing, to approach $800 million in fiscal year 2023. We continue to expect fixed costs to grow less than 10% and external marketing to be consistent with prior guidance, even when including our investment in May. With regard to our balance sheet, we ended the Q2 with $1.1 billion of cash and now plan to end the year with more than $1.2 billion of cash. As a reminder, we expect approximately $120 million of capital expenditures and capitalized software development costs for fiscal year 2023 and changes in net working capital to be a modest source of cash. We expect this level of CapEx to continue in 2024. Moving on to our full-year 2024 guidance, we are poised for a rapid increase in adjusted EBITDA due to continued strong revenue growth, coupled with a scaled fixed cost structure. For 2024, we expect revenue in the range of $4.5 billion-$4.8 billion, or nearly $1 billion of incremental revenue growth compared to the midpoint of our fiscal 2023 revenue guidance and more than double our revenue from 2022. Our guidance range for 2024 Adjusted EBITDA is $350 million-$450 million, which equates to more than $500 million of year-over-year growth compared to the midpoint of our fiscal year 2023 Adjusted EBITDA guidance, and more than $1.1 billion of Adjusted EBITDA improvement since 2022. Our guidance range for 2024 includes investment to launch approximately 5% of the adult population. In addition, based on the midpoints of our fiscal year 2023 and 2024 guidance ranges, we expect year-over-year adjusted EBITDA flow through percentage of 53%, which we look forward to delivering. In sum, we had an excellent Q3 and are very excited about the trajectory of our business. We look forward to sharing more details at our upcoming Investor Day. That concludes our remarks, and we will now open the line for questions. Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered, or to remove yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Shaun Kelley with Bank of America. Your line is open. Hi, good morning, everyone, and thank you for taking my questions. Just wanted to start with sales and marketing. I think, you know, one of the many things we learned this quarter was seeing, you know, your overall sales and marketing actually decline year-over-year, and I believe implying external marketing down, you know, even more during the quarter. As we look out to next year, I think that pattern actually continues, and I was just wondering if you could elaborate a little bit on what's enabling you to do that and still make the investments that you hope to, and sort of just talk to us a little bit about both mix, meaning new customers acquired versus existing, and also seasonality, if you could. Just how should we think about external marketing across the year? Thank you. Thanks, Shaun. So you're correct that we do expect further decline in external marketing next year, and that is inclusive of potential launches in North Carolina as well as some other states. So, all specifically the states that have legalized, not any new states we're predicting legalization. And I think the biggest reason why is that, you know, as our existing states mature, we see less and less external marketing spent there. We are still continuing to acquire customers, even in our oldest state vintages. So, you know, we do still have marketing spend allocated to those, but it's certainly not nearly at the same level as in the first year, two, three of a state. So as states mature, that comes down. And, and so just generally, as the business is maturing, we're seeing that happen, which is what we expected. Of course, if we see, you know, some very significant, new states come online next year, that could change. But, ... right now, based on the kind of launch that we expect, states that we expect to launch, we're forecasting an external marketing decline next year. Thank you. One moment before our next question. Our next question comes from Jeff Greff with JP Morgan. Your line is open. Good morning, guys. Sorry, Jeff. Sorry about that. I've been getting that since third grade. Hey, Joe. When you look out to 2024 and you, and you look at, when you roll up your guidance and, and your, your forecast, and when you look at OSB older states and, and newer states, is there a more meaningful contribution coming from the older states, or, or how are you looking at between the, the different cohorts and vintages? Yeah, that's a great question. We actually are going to dive into that very specific topic in much more granular detail at our Investor Day on the 14th. So very much look forward to sharing detail there. And, you know, I think the way you could think about it is, if you look at sort of the relative population sizes of the different vintages, and then think about the maturity curve, obviously the older states are still growing, so on a per capita basis, they will be larger. And then, you know, if you kind of think about how big each vintage is based on the percentage of population, and then also think about the mix of, you know, whether it's just OSB or OSB and iGaming, that'll give you a picture of how much. But we actually are going to go into much more specific detail on this on the 14th, and I was very, sternly warned by my IR team not to run the, front-run the Investor Day, so I won't. But it's a great question, and look forward to sharing more with you in a couple weeks. Great. Thanks, guys. One moment before our next question. Our next question comes from Stephen Grambling, with Morgan Stanley. Your line is open. Hey, thanks. Clearly, there's been a lot of concerns or questions about the competitive environment, whether new entrants or existing folks who perhaps need to protect share. How are you planning for promotions into 2024 versus 2023 in the guidance that you provided? And could there be a reallocation from marketing savings that you're discussing? We continue, excuse me. It's a great question. We continue to expect to see decline in promotions. I know that, you know, there are a couple of states that report them, that different data, you know, can be extrapolated, but it's always tricky to kind of look at a couple states. We actually saw a decline year-over-year in promotion rate for our overall OSB and iGaming business in Q3. Obviously, as you know, we saw a gross margin increase of about 300 basis points year-over-year. Next year, we forecasted a 200-300 basis points gross margin increase, and that's, that's mostly from promotional decline. There's a little bit of hold rate increase in there, too, but definitely we'll stay disciplined. We've seen multiple waves of competition. You know, last time we saw a huge wave of competition, we stayed disciplined. We didn't increase our promotion rate, and I don't think we expect to do that this time. So you know, we've certainly contemplated a variety of different scenarios in our guidance, and at this point, I think we have a decent amount of experience and historical data on that, you know, different types of competition that might emerge. But I think the important thing for us is just to continue what we've done all along, which is to stay disciplined, to focus on bringing down promotion rate through optimization, and then just naturally, I think, you know, continuing to see the user base mature since so much of that promotion goes to new customers. I think if we continue to do that and execute well, the trends that we've been seeing for the last seven, eight quarters will continue. Sounds good. Thank you. One moment before our next question. Our next question comes from Carlo Santarelli with Deutsche Bank. Your line is open. Hey, guys. Thank you. Jason, when you guys think about your guidance for 2024, within the context of the share gains that you guys have showed consistently, but really stepped up in Q3, how are you thinking about, I think, relative to the 33, which is what you guys had in the release that's blended across both channels? How do you guys think about that share within the context of next year's net revenue and EBITDA guidance? Is it flattish, moving up, et cetera? Yeah, it's a great question. I mean, what we've always sort of typically guided the same way, which is we look at historical cohorts and data and project forward based on that. So, you know, implicitly, that generally implies a flat share. And I think a lot of why we outperformed this year by such a significant margin was just our share increase. So you know, certainly not banking on that for next year. We're confident that we have some opportunity there, and we believe that we can. But as far as you know, what's embedded in the guidance, our methodology hasn't changed. We look at historical cohorts, which kind of implicitly implies flat share in any projection going forward. Great. Thank you. And then obviously, you know, based on your scale at this point and the flow-through that you guys expect to receive or generate going forward, I guess the next question kind of becomes looking back to your March Analyst Day, when I think you guys laid out, you know, gross margins of like 56% at a steady state and some of the buckets, you know, platform processing, et cetera, that would kind of contribute to that. How do you think about like the evolution of maybe whittling down some of those costs, whether it be within processing or revenue share, and how far are we from having that as kind of a talking point around, you know, improving that gross margin? Hey, Carlo, Jason Park. Yeah, so, great question on the flow through, and I'll start sort of on the bottom end of the income statement, and Jason had already alluded to improving or declining external marketing costs within the 2024 time period. What I'd also add is we're gonna, you know, we've had a great 18 months of just exerting excellent discipline on our fixed costs. We'll continue to do that. Then into the cost of goods sold part, I, you know, we guided to a 200-300 basis point improvement in gross margin rate, primarily as the promo reinvestment continues to improve. We do, we do have multiple initiatives throughout the cost of goods sold structure, whether those, primarily around vendor-related negotiations and continuing to achieve scale through volume discounts. And those are, those are embedded within our gross margin rate guidance as well, and I think provide long runway of continued improvement, both at the gross margin level and the EBITDA margin line. Yeah, and I think, you know, as Jason mentioned, definitely the largest driver of gross margin improvement is continued just maturity of the base, which brings promotion rate down. But, you know, certainly the, in addition to some of the negotiations, we also just have existing contracts with volume thresholds that we expect to, over time, trip, that'll bring gross margins down, and that's one of the benefits of having scale. Yeah, Jason, and that, that's kind of where I was going with that. Like, what, is that timeframe in the next year or two, or is that kind of just ongoing and rolling? I think it's ongoing, really. I mean, at a certain point, you cap out, but I would imagine that, you know, Google gets better rates on vendors for things than we do. So, you know, I think just as you get bigger, you continue to be able to get leverage in those areas because you can afford to pay more, even if it's less on a percentage revenue basis. And that's generally how all these things work, is that as volume goes up, the rate comes down. And so yeah, I do think it's just kind of an ongoing thing. We have a team that focuses on this pretty much all year round and is continually looking for ways to optimize the COG structure. Great. Thank you both. One moment before our next question. Our next question comes from David Katz with Jefferies. Your line is open. Hi, morning, everyone. Thanks for taking my question. I'd like to talk about something that just, you know, has never come up until now, which is your cash flow statement. If we start to think about what next year brings with the 2024 guidance, and I think in the prepared remarks, you talked about keeping CapEx, you know, at a similar 120 level. You do start to, you know, pile up, you start to accumulate some cash. And you know, I'd love to get a sense for how you think about, you know, managing around that. Obviously, you wanna, you know, keep yourself positioned for a state like Florida or California or whatever may happen. You know, can you just maybe give us a little more color on how you're thinking about that? Yeah, it's a great question, and, you know, it's something we've actually been spending increasing time going through, looking at all different options, including, you know, organic investments we can make, you know, opportunities for capital structure optimization, buybacks. Looking at, you know, just basically, how do we deliver the maximum value over the long term to shareholders? So that is a great question. It's something that we feel fortunate that we now really are in a position to have real value creation from, you know, optimally making those decisions. To now we've been, as you said, focused on getting to this point, but definitely feel very good about our trajectory on the cash flow side. And, you know, we'll have more to say as we think it through, but definitely a great question and something that we're actively discussing here. Okay. Thank you. One moment before our next question. Our next question comes from Joe Stauff with Susquehanna. Your line is open. Thank you. Good morning, guys. Two questions. I was just wondering, you know, in your guide for 2024, Jason, you had mentioned, I guess, within the gross margin improvement, you had an assumption for an improvement in structural hold. What is that? And then wondering if you could just comment on, you know, the level of adult penetration and user growth that you're getting, you know, in Mass and Ohio. Obviously, you got to 7% pretty quick. Is it fair to assume that that's now higher? You just call it 2 months into the U.S. sports calendar. So great questions. You know, on the hold side, we've forecasted basically that we continue on the same level of structural hold rate we're on today. Obviously, there's some opportunities we think to potentially increase that, but right now that's what we have line of sight to, so that's what we've put in. And I'm sorry, what was the second question? Yeah, just to comment on, you know, trying to estimate, you know, so adult penetration, how many more customers are out there, user growth, et cetera. And, you know, you had given Ohio and Mass in terms of where you'd been, you know, you got to 7% pretty quickly, and I'm wondering, you know, where that is now. Yeah, it's a great, another great question. I mean, we haven't found a ceiling yet in the oldest states. We continue to acquire customers. Even in, you know, a state like New Jersey, which is our first state that we launched and obviously is bordering a lot of other states that have since launched, we continue to have healthy customer acquisition. So, you know, hard to say where the ceiling is. We're well into the double digits in terms of adult population penetration in some of our oldest states. You know, I think it really has a lot to do with how we continue to evolve the product. If we continue to make the product more appealing to a wider audience and continue to find ways to innovate, to reach more customers, then, you know, I think it can continue to go up over a long period of time. But certainly, at this point, we have not found the ceiling yet. Thanks, Jason. Thank you. One moment before our next question. Our next question comes from Dan Politzer with Wells Fargo. Your line is open. Hey, good morning, everybody. I was hoping you could talk a little bit more about hold, more maybe as you see it philosophically or the long term. I mean, is there kind of a target or upper limit you see relative to the kind of mid- mid nine level you're at now? And I guess maybe along with that, how do you think about the trade-offs for hold relative to LTV for the customer? Yeah, I mean, I think this is something that we'll just always continue to be analyzing and optimizing, and it's almost, you know, a tricky question to think about in that sense, because it really depends on where you're getting hold increase from. If you continue to create products that the customer wants, and that have demand, that have higher hold, then, then that can do a great job, I think, of continuing to raise your hold. And I think on the other side of it, if, if you're raising hold by, you know, either forcing people into things that they really don't want or making your pricing worse than the market, I think that that's obviously, you know, potentially gonna have a negative impact on LTV. So we're very focused on the customer and on creating—we think, and we've seen this with a number of products we've created, from SGP to Cash Out. We have a new one that we're gonna be talking about at our Investor Day, that we're launching, which I love, that I'm really excited about, that kinda, you know, fits this double, you know, objective of being great for the customer and, and holding better than the average. So, you know, I think we have a long runway on that front. And it's really about focusing on the customer and maximizing the LTV. So in the end, if we do see that anything, whether it's, you know, sort of just the concept that holds higher or a particular product or anything that we've introduced, is having an adverse effect on LTV, then obviously we'll try to turn the dials accordingly. But, that's really what the team is focused on. Hold is obviously a variable, promotions are a variable, but retention is the most important variable. So, very much focused across all value creation drivers across the LTV spectrum. And I think that, you know, hold is something that, you know, again, it's a little tricky because it depends on how you're doing it, but I do think there's a lot more room for upside there than not. All right. Thank you. One moment before our next question. Our next question comes from Robert Fishman with MoffettNathanson. Your line is open. Hi, good morning. On iGaming, despite still early days on legalization, has your confidence increased over the past year of how big of a driver iGaming can be for total company revenues and maybe also importantly, total company profitability? And then just separately, with some of your competitors using that vision for streaming NFL games this year, can you discuss your updated thoughts on streaming live games in your app and whether you think there's any long-term benefits for DraftKings? So great questions. On the, on the first one, I mean, iGaming is probably, you know, the one piece of our business I'd point to that's under-talked about. Mainly because, you know, we're only in 11% of the population now, 87% is still not legalized. Huge opportunity there. Obviously, still tremendous opportunity with a little bit around, you know, around half of the U.S. population not having legal sports betting and all our oldest markets still growing, too. But iGaming, as we've noted in the past, we believe, has, you know, roughly two times the TAM on a per capita basis, as online sports betting. So tremendous opportunity, and I do think you'll start to see more momentum in the States in the coming years. It's just as we thought in the beginning, sports is kind of leading the charge, but definitely feel like that's an under-talked about opportunity, and glad that you're bringing it up. Something that we, you know, much like the sports market, feel we're very well positioned in having the number one position in the market at this point. And then, you know, as far as the question on streaming and the app, it's something we did look at and continue to look at. I mean, one of the exciting parts of where we're at right now as a company and as an industry is that there's still so much innovation out there, and there's so many things that we can do to create value for the customer and for the business. And we had a really full product roadmap going into NFL. You know, didn't end up prioritizing that one, but it's something we continue to evaluate. And like I said, I think the fact that there's things that people feel are value-creating out there, that, you know, we probably would agree, are value-creating out there, that still didn't make the cut because we have so many other really exciting things that, that we believe are adding value and generating the results that we've generated. It's just a really special time right now in the evolution of the market to be at, where there's so much great opportunity and so much innovation. And, you know, I think this is a great example of just this long product roadmap we have of things that we know and have confidence will deliver value, and it's just a matter of time before we, we can get to it all. Perfect. Thank you. One moment before our next question. Our next question comes from Barry Jonas with Truist Securities. Your line is open. Hey, guys. Good morning. Can you maybe talk about your expectations for the next wave of states to legalize OSB and where you could get access? Thanks. Yeah, great question. You know, it's hard to say. Obviously, if you look at the map. You know, a lot of the biggest states outside of the top three have already legalized. Obviously, Georgia is still one, that's in that top ten that, you know, has had some momentum in the last couple years, and hopeful that we get some traction there this year. You know, obviously, the big prizes of California, Texas, and Florida are still out there, but those might be a little longer path with Texas not meeting again till 2025, and, you know, Florida and California requiring ballot initiatives. So, you know, those, those are really kind of the big states in terms of population left out there. I would say probably the clearest path now of them is in Georgia, but, you know, still really hard to say what the timing and likelihood of that is. Then more on the midsize states, we had good traction and progress in Minnesota last year. I think that could be one that's in play. Missouri, I think there continues to be a lot of, you know, interesting routes. There's some complications there, too, but, I think there's potential for that one. And then, you know, like every year, there's always some states that we didn't anticipate going into the legislative session, then all of a sudden there's some momentum around, and, you know, we usually figure that out either toward the end of the year or early next year, as people are starting to think about introducing bills in the upcoming sessions, many of which start in Q1. So we'll know a lot more in the next three or four months, but definitely think we'll get some more states this year, and those are a handful of the ones we have our eye on. Great. And then just for a follow-up, with ESPN Bet coming online mid-football season, do you expect some trialing from your user base? And is this at all reflected in your guidance explicitly? Thanks. You know, we've seen so many waves of competition now, and, you know, we've really always had a highly competitive market. It's not like we haven't, you know, had fierce competition pretty much from the start. So, you know, we always expect that there will be competitors that will come and try to give, you know, our customers an experience, and we have to just give, give them a better experience. And, you know, certainly there are people that will go take promos, and, and that'll happen, but in the end, we believe that most customers will, will gravitate to the best product, the best experience. So we're gonna stay disciplined, and, and I think it'll probably play out in a very similar fashion to other times. But, you know, we've contemplated all sorts of scenarios in our guidance. That's why it's guidance with a range. You know, we definitely have thought through what we think the competitive environment and, you know, different flavors of that could look like. We feel that, you know, based on now that we've been through this a few times, not only do we have experience managing it, we also have a lot of data, so we feel pretty confident that our guidance range is going to encompass any variety of scenarios that could possibly emerge on the competitive front. Great. Thanks so much. One moment for our next question. Our next question comes from Robin Farley with UBS. Your line is open. Great, thanks. I have two questions. One is kind of a follow-up to the topic just prior. It sounded like you were saying your forward guidance is based on kind of flat market share with where you are at a given point. And I guess I'm just wondering to what degree you might have factored in that, you know, there were some competitors that either closed up shop or sort of temporarily, but would be coming back. And so, is there a factor in there when you think about market share next year compared to this quarter? Or are you thinking that that's that the share this quarter was not impacted, didn't benefit from that at all? Then my other question is, it's just, I'm wondering if you could give us a sense of any difference in consumer behavior between an OSB customer and an iGaming customer, because we can see the cumulative aggregate revenues by state, but you would see kind of what's happening on a per person basis, just thinking about, like, any consumer behavior there, more strength or impact from, you know, consumer concerns right now in one versus the other. Thanks. Yeah, great question. I mean, on the first question, you know, probably the best way to think about it is the guidance kind of is implicitly, just due to the methodology, going to gravitate towards, a flattish share. And it wouldn't necessarily be like a flat share to the moment, right? Because we're looking at, you know, historical cohorts and seasonal data, so it really would encompass more of a steady state share over a recent period of time than, like, a point in time, like this month, you know, share type of thing. So that, that's how I would think about it. And then, you know, as I noted, I think really the range itself contemplates a variety of different scenarios and competitive impacts, including, you know, any impacts that we might see to share to customer behavior. But, really, you know, based on historical data, we feel like we have all those scenarios properly encapsulated in the guidance range. So that's really how I think about it. And then, you know, really, I think there's also an element of, you know, just us having confidence that our customers and our cohorts have been sticky through multiple waves of competition. And, you know, flat share to me would be a disappointment. We've been gaining share. I expect us that, you know, our team is gonna be dissatisfied if we don't continue to gain share. That doesn't mean that we're necessarily going to guide to that. Obviously, as I noted, we're not. But, in some ways, you might think of flat share as actually, you know, a disappointment and some, you know, kind of impact that we weren't anticipating in that sense. But, I think for us, really, the goal is always to continue to gain share, and, you know, I think it's just a matter of how we forecast and the guidance methodology that we choose, that you end up with the sort of flattish share implicit assumption in there. And I'm sorry, what was your... The second question was on iGaming and OSB customers, I think? Yeah, and kind of the consumer behavior, if one or the other is looking a little bit different in the last few months. Yeah, you know, the key difference between the iGaming and OSB customer is really the OSB customer is very seasonal and event-driven. There are certainly people that bet on sports throughout the year, but the fact of the matter is that the sport calendar changes throughout the year. So you're just gonna have more betting in times of heavy sport, like right now, versus, you know, dead of summer or something like that. iGaming is kind of there and is the same all the time. So while certainly we have overall activity differences, because more customers on the platform for sport mean more cross-sell into iGaming, on the individual customer basis, their behavior isn't gonna change a whole lot throughout the year. There's some seasonality to it, but, you know, people tend to, during holiday times, have more downtime and things like that, but it's much more, you know, much less pronounced than the OSB customer, much more steady throughout the year. Okay, great. Thank you. One moment for our next question. Our next question comes from Bernie McTernan with Needham and Company. Your line is open. Great. Good morning. Thanks for taking the question. Revenue growth has just been really explosive over the last couple of years, but the guidance for 2024 has the year-over-year growth stepping down. What are some of the tailwinds that have been supporting the revenue growth slowing as we move from 2023 to 2024? Yeah, I think it's really just the size of the base increasing. I mean, if you look at the absolute revenue growth, it's actually, you know, close to $1 billion in our guide for next year. So very healthy growth, just certainly as the base gets bigger, that percentage is gonna be harder to keep in the 50-60+ range. So I think that's really the big thing. Obviously, you know, there's an effect on new states that can either increase or if there's a lack of new states, decrease that. So that's something, as you think about long-term TAM, always to keep an eye on. But, you know, I think really what we're seeing next year, because we still do see very healthy growth across all of our state cohorts, it's just a matter of we're coming off of a very large base of revenue, and, you know, adding $1 billion of revenue doesn't give the same percentage, or nearly $1 billion, I should say, doesn't give the same percentage increase as it did in the past. Understood. Thanks, Jason. One moment for our next question. Our next question comes from Brandt Montour with Barclays. Your line is open. Hey, good morning, everybody. Thanks for taking my question. So just one on iGaming, another quarter of sequential market share growth there. I'm curious if you'd call out, sort of, you know, your OSB share, OSB momentum cross-sell as the main driver of that sequential share lift, how much, you know, growth in comparison to that are you getting from penetration in the Golden side and sort of getting more of those older customers, those slots customers, and growth from that angle? And if you saw any benefit in the quarter from disruption at a certain competitor that had headline stuff in the news. Yeah, so, you know, I think really the iGaming business, I mentioned this a few questions ago, I think is under-talked about. It's just such a strong business, steady growth, and we just continue to be able to cross-sell better and acquire more efficiently as we get more data and test more things. So I think there's a ton of upside as you see more states legalize iGaming there. We don't have to reacquire a lot of the customers because such a large percentage of our share does come from cross-sell. The other thing I'd note that we got a little bit of boost on is, you know, we launched Golden Nugget in Pennsylvania. That was the first state that Golden Nugget is actually on the DraftKings platform, so very excited about that. We saw some really strong early results there and continue to feel really positive on the trajectory there. And then we do expect to see more benefit from, from continuing to migrate Golden Nugget in other states. You know, Pennsylvania was a new launch. We actually haven't migrated any states yet. That's all on the docket over the next couple of quarters. We're gonna migrate pretty much, we're gonna migrate every state, for, for Golden Nugget Online Gaming. So, really, I think that's something that, that also contributed to a little bit of the share increase, and hopefully, there's some more juice in that as we migrate these other states and continue to optimize the iGaming. Great. Thank you. One moment before our next question. Our next question comes from Clark Lampen with BTIG. Your line is open. Thanks. Good morning. Appreciate the question. I actually wanted to follow up on some of the comments that were just made around Golden Nugget. I know you launched the standalone app in Pennsylvania. I suspect, kind of as you were saying, that means the tech stack migration is done, or at least most of the heavy lifting is behind us. If I heard right, it also sounds like with direct cost guidance next year, that there really isn't much in terms of savings contemplated. Could you remind us, I guess, as you're moving, the legacy product onto the Golden Nugget stack, is this something that's really gonna benefit share? Are there other efficiencies that accrue to you guys, I guess, from moving on to that stack? Or is it mainly, I guess, sort of the share and then exploring, I guess, sort of first-party versus third-party product mix opportunities? Thanks. Yeah, so it's a great question. We actually will get cost of goods sold synergy. There's some, you know, timing things with, you know, contracts that have certain time frames that affect the timing of when those synergies will actually fully materialize. And, you know, what we determined was they're, they're not very material to next year, but they are there, and we do expect to see some impact on the cost-saving side. And then, you know, as you also alluded to, I think there's some upside on the revenue and, and share side as well, given that we, we have pretty consistent data showing that our product and our platform converts new customers better, monetizes existing customers better, retains better. So really feel like there's some upside there as well. And, you know, Golden Nugget's one, the same kind of story. We haven't built in a massive share increase or anything there. So, you know, it'll be interesting to see what we can do with that brand. Obviously, we have high hopes and are very excited about the migration coming up, and hopefully there's some upside in that for us, and it's certainly been a contributor. I mean, you know, as I noted, we did gain share on the DraftKings brand, too. But when you combine the two brands, we're, we're almost at 30% share now in iGaming, which is, you know, if you think about where we thought we could cap out a year or two ago, it was lower than that. So, we're, we're pretty bullish on the iGaming opportunity and, feel like, you know, lots of exciting potential tailwinds in the 2024 product roadmap there. Does it enable you guys to be a little bit more aggressive, I guess, with first-party products next year also? Or should we think about, I guess, sort of the same relative mix that we saw, you know, sort of this year and in the past? I mean, certainly as the iGaming business grows and you can amortize those investments over a much larger revenue base, it's going to make more and more sense to invest in first-party products and bring in more and more things in-house, even on some of these tail games and things, you know, like, long-tail games, I should say, and things like that. So, you know, iGaming is such that we'll always have third-party partners. There's just certain content, whether it's IP, that we don't have the rights to or otherwise, that you want, that others have. But I think as we continue to be able to build that base, and have a larger revenue base to, you know, amortize our product investments over, it's going to make more and more sense to try to bring some of the longer tail games in-house. And of course, we're always, and that hasn't changed and won't change, trying to innovate and come up with new games that are differentiated and gain market share. And also we'll have the effect of, of course, cannibalizing third-party games as well. So that's always something we're doing. But I do think that as we increase the size of it, there will be just an economic argument that emerges on some of the longer tail games that doesn't exist today. Yep. Yep, makes sense. Thank you. One moment for our next question. Our next question comes from Michael Graham with Canaccord. Your line is open. Thank you. I wanted to follow up on the product development topic for a minute. You know, you've had such a great pace of innovation over the last couple of years. Like, can that accelerate, you know, over the next couple? And, you know, related to that, one of the things we've seen historically from the great big tech, you know, giants, I'm thinking like Netflix, Google, you know, Facebook, they've been able to institutionalize an engineering-led, you know, product development ethos that has really enabled them to kind of extend leadership over time. I'm just wondering how prominent that is in your strategic thinking. I mean, that is absolutely essential in our strategic thinking. We, we've said pretty much from day one that product wins, and that is, you know, first and foremost, the thing that we feel like has to be at the absolute forefront of the industry in order to be the best. Obviously, there are a lot of other things that go into customer experience, marketing, analytics, many other elements of the business are important, and we invest across those, too. But really, the heart and soul of the organization is product and technology. And, I think you're absolutely right that that's something that we really feel like over the last several years has been a differentiator, really from day one, has been a differentiator for us. You know, as far as the first part of your question, the pace of innovation, I actually expect it to increase. You know, a lot of the work that we had to do once we had acquired our own technology platform and then some of the cleanup afterwards, you know, that was really ongoing until late into 2021. So it's really been less than two years that we've kind of had, you know, just full runway. Not to mention the fact that there's many other infrastructure investments that we had to make over time that now positioned us to just more rapidly innovate. So we're always balancing, you know, whether it's implementation of AI to improve developer efficiency on our PAM. We're building out an API-driven structure so that teams outside of the PAM team can unlock different features in there and integrate products in a better way. We're just always trying to think about not only how do we innovate for the customer, but also velocity and pace of innovation. How do we make our teams more efficient? How do we make them quicker? And some of that, as you said, is cultural, for sure. But there is also an infrastructure investment piece of just making it easier. I mean, as it gets you know, the organization gets larger, we're in more jurisdictions, the natural tendency is for it to get more complex. There's just a constant, I think, push on our end to not accept that and to try to drive more efficiency so that we can innovate at a faster velocity. Thank you, Jason. One moment for our next question. Our next question comes from Jed Kelly with Oppenheimer. Your line is open. Hey, great. Thanks. Thanks for taking my question. Just going back to hold, as you engage more customers, playing more sports, layer on more, you know, parlay products, does that reduce the volatility around your ability to forecast hold? Like, does it become more consistent? And then just in line, just with the 4Q guidance, does that assume that, you know, the percentages you saw, the hold percentages in October, do you expect that to continue for November and December? Thank you. ... So, you know, on the first question, I think really just as we get more data and as the market matures, everything, whether it's, you know, hold rate or any other metric of the business, you know, the forecasting gets tighter and tighter, which is great. I do think we're already pretty tight on hold forecast in terms of expected hold. There's just sport outcome. And as far as your question on mix and how it affects it, you know, really, as time goes on, having more variety, meaning more sports, more different types of bets, will certainly make it more steady. So as live betting grows, as, you know, more sports get adoption, all of that, you know, it, it's exactly what you'd think. Like, the more concentrated in one type of bet or one sport anything is, the more susceptible you are to sport outcome, you know, effects. So, as time goes on and as the base matures and as more people play more things and try more products, we do expect that volatility to decrease. And, you know, also, as we see more iGaming, I think same thing. More iGaming states will also just smooth it out because the hold rate does not vary as much on iGaming based on any sort of outcome-driven event. So, that's a couple ways I think about it. As far as the Q4 guide, you know, we've assumed structural hold is the same. We did, you know, see some favorable sport outcomes, kind of the opposite of Q3 in October. I wouldn't necessarily say the exact hold in October is what we expect through the remainder of the year, but we believe that structural hold will be in line. You know, we sort of always take an outcome-agnostic approach when we're forecasting, but then appropriately build into our guidance range, all sorts of different scenarios that might occur. Thanks. Great quarter. Thank you. One moment for our next question. Our next question comes from Ryan Sigdahl with Craig-Hallum Capital Group. Your line is open. Hey, good morning. DraftKings hasn't participated directly via its DFS business, but any thoughts on Michigan, New York, Florida, all cracking down on pick'em and player props via DFS and some of your competition there? And secondly to that, could that potentially be good for your sports betting OSB player prop business in New York and Michigan? Yeah, it's a good question. I definitely think that cracking down on the, you know, legal market is, is a good thing for us. And, the AGA, I believe, I hope I don't mess this number up, said that just in legal betting states alone, there's about $4 billion right now of revenue leakage that's happening into the illegal market. So it's a real issue and probably costing states close to $1 billion in tax revenues at this point. So, definitely a big deal and, you know, something that we're, we're happy to see states doing. But, you know, we haven't really thought about any direct impacts on the business. It's, it's not something we contemplate in our guidance. And, you know, I think depending on the situation, there could be, you know, potential for some of that revenue that's leaking to the illegal market to come back into the legal market. And if that happens, we certainly hope that we get our fair share of it. Impressive performance, guys. Good luck. Thank you. One moment for our next question. Our next question comes from Jordan Bender with JMP Securities. Your line is open. Great. Good morning. From the market share gains in recent quarters, I was wondering if you guys had a sense of how much of that is true player conversion coming from other apps versus, finding new players in existing space, versus even hold rates pushing up GGR share and just overall growing the market? Thank you. I think it's a combination of multiple things. I mean, internally, we see all of our metrics going in the right direction. Retention rates are up, hold rates are up, promotional reinvestment rate across OSB and iGaming is down. All of that, independent of, you know, any sort of, you know, competitor wallet, you know, dynamics, all of that is, is true. So, just sort of based on that math, yes, that, that certainly led to a, a reasonable amount of the share increase. It's really hard to say, you know, how much of it's that, how much of it's new players coming into the market and us disproportionately acquiring those players relative to competition, and then retaining those players better relative to competition versus truly stealing players from competitors. We don't really know. We certainly know that, you know, among some players that they have tried multiple apps, and we think that getting them to decide that we're the best and we're the place they want to concentrate their play is an advantage. But it's hard to say, you know, historically, how much of share gain has been driven by one factor or another. Great. And then for my follow-up, Jason Park, I believe you said you're assuming next year, 5% legalization that's legalized, not launched yet. Is that to say you guys are moving away from assuming incremental legalization within your revenue guidance? That's correct. Our revenue guidance includes assumed launches of states that, in total, represent 5% of the population. Thank you very much. One moment for our next question. Our next question comes from Stephen Glagola with TD Cowen. Your line is open. Yeah, thanks for the question. DraftKings took pretty significant OSB share in New Jersey in Q3, and, and the state license, I think, got to, like, almost 49%. Can you just provide some more color on, on what's driving that? You know, what you're doing with the VIP activity there? If you can quantify, you know, on the revenue upside for the quarter, how much was driven by New Jersey? And then, and do you expect this market share to be maintained in Q4 and, and 2024? Thank you. ... Yeah, very good question. You know, New Jersey has been a real great story for us. It was our first state. It continues to be one of our largest states, but early on, you know, we got off to a hot start, and then, you know, we candidly, you know, our first state, had a weaker product at that point, and we lost a lot of share to the competition and ended up dropping down quite a bit relative to where we are today. I think the team is really focused on building out that, you know, great experience, driven by a great product, and we're winning across segments from the most casual to VIP in New Jersey. All of our segments are performing well. Customer acquisition continues to be very strong in New Jersey. Whoever thought that once New York and Connecticut and everywhere else, and then Pennsylvania launched, that New Jersey would not have any growth anymore, was wrong. Continue to see quite a bit of customer acquisition and growth in New Jersey, and, you know, iGaming has been around for, like, a decade there and continues to grow at a steady clip. So I think when you kind of put all that together, New Jersey has obviously always been a big focal point for us, and we knew that there was a lot of opportunity to recapture there, given that it was our first state, and we've made so many enhancements to our products in some of the early days. We're very, you know, grateful that many customers have given us a shot and have seen a lot of the product and experience improvements that we've made. Thank you. One moment for our next question. Our next question comes from Chad Beynon with Macquarie. Your line is open. Morning. Thanks for taking my question. Understanding that the focus remains in North America, given some settling out in some international markets, given regulation changes, has anything changed just in terms of the risk-reward, kind of looking outside of North America, given where your product is right now and where the balance sheet is? You know, we obviously are aware of the global gaming market, and I think long term, there's a lot of upside for us there. We believe that the product and technology investments and other operational infrastructure, marketing infrastructure we're building, will be very portable throughout the globe. That said, you know, we also understand that the largest market in the world is developing right now, and we're in a really strong position, and a lot of what we feel has helped us and benefited us has been our singular focus here. So, that's something that we're very cognizant of, and you know, as we think about longer term opportunities, it's really important that we always keep that in mind and continue to make sure that the focus is here. You know, if we can figure out, over time, a way to find other ways to capitalize on the global opportunity, we will, but certainly would never do so at the expense of our focus in the U.S., which obviously we think is, you know, just a tremendous opportunity in front of us. And, you know, as I said, I think a lot of what's benefited us is having that focus, and we don't want to give that up easily. Thanks. Appreciate it. One moment for our next question. Our next question comes from John DeCree with CBRE. Your line is open. Good morning, everyone. I've covered a lot of ground, maybe just one question on maybe some insights into consumer behavior from where you guys sit. I don't know if you could talk a little bit about what you're seeing, you know, as states mature versus new states that launch, the customer evolves in terms of, you know, average bet or average deposit size, you know, those kind of metrics that you look at and, you know, how they've been trending. I guess, with the, you know, the notion that new states are... You're penetrating quicker, they're reaching contribution quicker. Are they just starting at, you know, a more sophisticated or more mature point than older vintages? So, you know, kind of a broad question, but curious if you, you know, can talk about any of those trends. Yeah, it's a really fascinating question, and there's a lot of different data and insight that can be gathered from looking at all the different states. It's an interesting one. So, you know, to more stay at a high level, answer your question, as you noted, the penetration rate is definitely increased penetration to the adult population in terms of how fast that's happening. As a result, you might imagine, we're acquiring a larger base of customers, going deeper, therefore, also means that, you know, we're not just acquiring some of the same types of customers we acquired very early in other markets. We're also acquiring some of the customers that we acquired later in other markets. But overall, you know, it's still that initial cohort is incredibly valuable, and, we've really seen most of that show up in increased CAC efficiency just because, you know, such a large influx of new customers has really brought the CAC down for us in a lot of the new states in the early days. So that's something we're definitely seeing. And, you know, as far as the other dynamics go, there's also improvements in things that we've made to the product and the way that we do CRM that have affected things. So we're seeing customers in new states come in generally with a higher starting parlay mix because, you know, it's easier to kind of get people accustomed to coming in on some of these new products we've launched versus older states, getting people to retrain behaviors to try different products when they're used to using, you know, the product in a certain way. And I think that has the opposite effect. It increases the immediate, you know, monetization and things like that. So, a lot of moving levers there, but overall, I think you're kind of seeing those two high-level factors impact things. The product improvements and CRM improvements we've made are increasing some of the metrics coming out of the gates, but you're also just seeing so much faster ramp in the population penetration that we're capturing more casual customers with some of the, you know, more, diehard customers in there in that early phase as well. You know, both of them are, I think, overall, you know, resulting in a net, very positive impact for us. We're seeing great CACs, relative to where we saw in the early days of launching new states, and the LTVs continue to be incredibly strong from those early cohorts. Understood. Thanks, Jason, I appreciate the additional color. Ladies and gentlemen, this concludes the Q&A portion of today's conference. I'd like to turn the call back over to Jason Robins for any closing remarks. Thank you all for joining us on today's call. Really excited about 2023, shaping up to be an excellent year for DraftKings. So proud of the team for our Q3 results and looking forward to close the year with a bang. And really equally, if not more excited about 2024 and beyond. Lots of great things ahead on the product side, and also very excited to be having a very meaningfully positive Adjusted EBITDA year for the first time. So lots of good milestones ahead. We're excited about the opportunity, and we look forward to sharing additional insights at our Investor Day on November 14th. Hope everybody has a great rest of the next couple of weeks. We'll see you again on November 14th. Thanks. Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.