Good day, and thank you for standing by. Welcome to DraftKings' Q3 2024 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'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alan Ellingson, DraftKings' Chief Financial 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. We'll share some opening remarks and an update on the business. Following Jason's remarks, I will provide a review of our financials. We will then open the line to questions. I will now turn the call over to Jason Robins. Good morning, and thank you all for joining. As you can see in our results, our core value drivers are strong. In the Q3, we acquired more online sportsbook and iGaming customers year over year, while CAC declined nearly 20%. Structural sportsbook hold percentage continued to increase. Our trajectory here is encouraging, with NFL parlay mix tracking up more than 500 basis points year over year. Our promotional reinvestment rate improved by 300 basis points year over year as a percentage of gross gaming revenue, even though we acquired more customers and had higher new customer promotions. These core value drivers collectively contributed to a 300-basis-point year-over-year improvement in adjusted gross margin for the Q3 of 2024. While we experienced the most customer-friendly stretch of NFL sport outcomes we have ever seen early in the Q4, which pressures our revenue and Adjusted EBITDA in the short term, the overall trajectory of our business is strong. We are excited to reiterate our fiscal year 2025 Adjusted EBITDA guidance range of $900 million-$1 billion and introduce our inaugural fiscal year 2025 revenue guidance, which calls for 31% year-over-year growth at our guidance midpoint. Even more importantly, our sportsbook product is continuing to improve, which positions us well for this NBA season and beyond. This fall, we launched new and exclusive NBA markets, specifically designed to engage customers with key game storylines and expanded our in-house same-game parlay offering to more than 50 new NBA markets. We also appreciate being recognized in a recent third-party report as the number one overall sportsbook app in the U.S., ranking first in the user experience, betting interface, and features categories. Our apps now rank number one in sportsbook and number one and two in iGaming with the DraftKings Casino and Golden Nugget Casino brands, respectively. Lastly, I'd like to touch on the ballot initiative in Missouri. Earlier this week, Missouri voters passed a ballot initiative legalizing online sports betting in the state, following a productive and efficient campaign that was backed by a wide consortium of sports teams and gaming operators. Missouri represents approximately 2% of the U.S. population, and we expect to launch our sportsbook product in the state pending market access, licensure, regulatory approvals, and contractual approvals. In closing, our business fundamentals are healthy, and we are excited about our financial trajectory into 2025 and beyond. With that, I will turn it over to our Chief Financial Officer, Alan Ellingson. Thank you, Jason. I'll hit the highlights, including our Q3 performance and our fiscal year 2024 and 2025 guidance. Please note that all income statement measures discussed, except for revenue, are on a non-GAAP Adjusted EBITDA basis. As Jason mentioned, our business fundamentals were healthy in the Q3. We grew revenue 39% year over year to $1 billion and $95 million, and generated a $59 million Adjusted EBITDA loss. Our online sportsbook gross gaming revenue increased 39%, and iGaming gross gaming revenue grew 26% when compared to the Q3 of 2023. Newly acquired online sportsbook and iGaming customers increased 14% year over year, while our CAC for these customers improved nearly 20% year over year. Structural sportsbook hold percentages increased year over year as customers continued to enjoy our parlay offerings. Promotional reinvestment rates for our online sportsbook and iGaming improved by 300 basis points year over year as we reduced promotions for lower-value customer segments and began to mitigate the impact of the Illinois tax increase. Adjusted gross margin was above our expectations at 40% and increased 300 basis points year over year. Looking ahead, I'll briefly comment on our fiscal year 2024 guidance before discussing our expectations for fiscal year 2025. On August 1, 2024, we guided fiscal year 2024 revenues of $5.05 billion to $5.25 billion and adjusted EBITDA of $340 million-$420 million. Our Q3 financial performance was consistent with our expectations. NFL outcomes early in the Q4, however, have resulted in headwinds to revenue and adjusted EBITDA of $250 million and $175 million, respectively. We have also made significant progress in identifying customers with lower lifetime values across our footprint and are improving our expectation for promotions for the remainder of the fiscal year 2024 accordingly, and we are continuing to drive expense efficiency throughout the organization as we balance growth and profitability. As a result, we now expect fiscal year 2024 revenues of $4.85 billion-$4.95 billion and fiscal year adjusted EBITDA of $240 million-$280 million. Moving on to our fiscal year 2025 guidance. In November 2023, we stated our expectation that fiscal year 2025 adjusted EBITDA would be in the range of $900 million-$1 billion. We reiterated this expectation in August. Given strong underlying momentum in our core value drivers, we continue to expect fiscal year 2025 adjusted EBITDA of $900 million-$1 billion. Today, we are introducing a fiscal year 2025 revenue guidance range of $6.2 billion-$6.6 billion, which equates to year-over-year growth of 27%-35% compared to our updated fiscal year 2024 revenue guidance midpoint. We expect structural sportsbook hold percentage of 11% in fiscal year 2025, with further upside in fiscal year 2026 and beyond. We expect our fiscal year 2025 adjusted gross margin to be in the range of 45%-47%. We expect stock-based compensation expense to represent approximately 6% of revenue in fiscal year 2025. Additionally, we expect the bridge between adjusted EBITDA and free cash flow to be $100 million, and therefore expect to generate free cash flow of approximately $850 million in fiscal year 2025. 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 11 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 11 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. Thanks for taking my question. Jason, if we could start off, I think most of our questions this morning from investors have really kind of been around the flow-through assumptions for next year. So obviously, some pros and cons, but where we left it a quarter ago, I think you had spoken about a 50% flow-through kind of on a long-term basis, and I think that's somewhat of the long-term objectives had kind of pinpointed to. This year for next year, you're looking at 39%. So could you just talk about some of the puts and takes behind those variables, as well as sort of how it interacts with what you're seeing on the revenue and customer acquisition side at this point? Thanks. Thanks, Shaun. Yeah, so I definitely feel 50% is about the right number long-term for flow-through. I think next year, what you're seeing around 40% rather than 50% is that we have, as we've noted in the last couple of quarters, been seeing unexpectedly strong customer acquisition. And that's a really great thing for the long-term potential and the TAM of the industry, but obviously, we want to be cautious next year that we don't end up underestimating customer acquisition promotions and therefore having a higher flow-through guide than what actually materializes. So that's really the thinking behind that. As we've noted in the past, should customer acquisition slow, I think whenever that happens, there'll be some short-term adjusted EBITDA upside. So that could very well be the case in 2025. Obviously, we want to see the continued customer acquisition because that bodes well for 2026 and beyond. But, should there be less than expected, or, I should say, a slowdown in customer acquisition, could definitely be some upside to that flow-through rate that you mentioned. Thank you very much. One moment for our next question. Our next question comes from David Katz with Jefferies. Your line is open. Morning, everyone. Thanks for taking my question. So just rolling through the rest of the year, one of the discussions we've been having is, how do we get comfortable month to month and quarter to quarter that the kinds of impact that we see here don't recur and/or flip back in the more positive direction? I guess what I'm asking is if you could talk about some of the levers that you have at your disposal and how the business evolves to mitigate some of the luck factor that showed up here. That's a great question. Obviously, the shorter the period, the more that volatility and sport outcomes can affect things. So only being about a month into Q4, I think just the timing of when you're seeing the guide, it's obviously going to a month period is going to have more volatility. And as you noted, it could swing either way. Just last night, Bengals make that two-point conversion, and that last touchdown doesn't go in for a fourth parlay leg to hit for the touchdown parlay, then would have been very different outcomes. So things can swing either way. I think certainly over longer periods of time, it normalizes. It was a little bit of a down year this year. This year, we are around or we'll expect to be around 10.5% structural hold, and we'll finish just over 10% actual. At least that's what we're tracking now. Maybe sports outcomes will improve. But that's typically, over the course of a year, a pretty big number. So I think over a year, it's pretty smooth. And what you'll see, I think, as the business evolves, right now, our Adjusted EBITDA is a small percentage of our revenue. As that continues to go up and we approach our long-term 30-plus% margins, you're going to see the impact of sports outcomes because they affect revenue flow-through at a much excuse me, affect the EBITDA at a much lower percentage. Think about it this way. Next year, our Adjusted EBITDA is going to double at the top end of our guidance range, but we expect revenue to grow at a just over 30% pace. So the impact of sport outcome on revenue is obviously going to be the same, but on EBITDA could be or excuse me, it'll be about a little over 30% higher, but on EBITDA, it'll be on a number that's four times bigger. So as we scale and the business generates more and more EBITDA, these impacts will become more rounding errors. But obviously, now in a year where we're just turning positive adjusted EBITDA for the first time in company history, it's going to be a bigger impact. Understood. Looked like past interference to me. Thank you very much. One moment for our next question. Our next question comes from Robin Farley with UBS. Your line is open. Great. One small thing, just wondering, I don't know if you said the hold percentage in Q3. And then the bigger question is, with Illinois, you've talked about changing promotional activity to kind of offset the higher tax. Can you talk a little bit about, do you feel like you have sort of fully figured out how to do that, or is that still a work in progress? In other words, where you want to be with that trade-off? Thanks. Yeah. So hold was as expected in Q3. We didn't see any. It was nice to actually have a neutral quarter, especially with NFL starting. And then as far as Illinois goes, I think we've begun to implement some things. We're still figuring out exactly what the right levels are, but if you see sort of in the bridge that we shared, we included some promo efficiency, and within that, one of the components is some mitigation in Illinois. So we have begun to implement that, but I wouldn't say that we fully realized it, and it's not a huge component of the guide next year, so potentially some upside there depending on how things evolve. Okay. Great. Thank you. One moment for our next question. Our next question comes from Carlos Santarelli with Deutsche Bank. Your line is open. Hey, guys. Thanks. Good morning. Jason, I was wondering, so within the context of the 31% revenue guidance for next year, to the extent you can, how would you parse that between market growth across both iGaming and sports betting, market share, and promotional extraction? If you could kind of bucket maybe the growth across those three verticals or any kind of direction you can give on that. Sure. So we do bottoms-up builds. So we typically will look at cohort data. Implicit in that, I think, is that market share doesn't change because we're basing our cohort data on what we've seen in the past, and we're basing our customer acquisition estimates on what we've seen in the past. So I think that's going to be basically implying flat market share. That said, we don't actually forecast it that way. It's more of a top-down exercise. We say, "Okay, if we kept market share flat, what would this imply for market growth?" and sanity check it that way. On the promotional side, we've been, I think, as I noted, a little cautious with the customer acquisition environment having been so hot. So that one, I think, could be a potential upside if there is lower customer acquisition, but of course, that's not as much a benefit in 2026 and beyond, but it could be some upside on the EBITDA front for next year. But we weren't too aggressive with that number, so it's not a huge component of it. So really, it's more about just kind of natural market growth, handle growth on our side, and then a little bit of structural hold improvement. Great. And then just on the promotional side, obviously, 300 was the number this quarter. Is that kind of in the ballpark of what you're looking to extract next year for the entirety of the year, or is it something a little more muted just based on what you just said, already the customer acquisition environment? Yeah. It's a little more muted just because we've been cautious on the customer acquisition environment, but it's really going to depend on that. I mean, the decline is going to happen just based on the fact that the base is maturing and it's more existing users. It's just a question of how hot customer acquisition is. So I think we've been a little more cautious and have had a bit more muted of an assumption, and we'll see how that plays out. Great. Thank you. And if I could, just one follow-up. You guys obviously provided some good disclosure around your MUPs and RMUPs in the period ex Jackpocket. The RMUP growth, I believe, was 8%. Is that just a mix issue of some of the newer customers you're bringing in, or is that something that maybe relates to some of the legacy customers and you guys getting a little bit smarter with managing volatility and whatnot? Yeah. I think it's more the latter. Obviously, as we bring on new customers, Jackpocket, there's a lot of moving parts. So one of the things that we noted in our letter is that we do intend to make some additional disclosures at the product level next year. We're still sort of sorting out exactly what those are, but I realize it's kind of confusing with the way we have it now, especially with all the different product lines that we have. So that's something we're taking a look at so that we can hopefully provide some more useful disclosures for all of you. Great. Thank you very much. One moment for our next question. Our next question comes from Joe Greff with JPMorgan. Your line is open. Good morning, everybody. I'll start with the question that Carla just asked and maybe ask it somewhat differently. If you can look back at the Q3 and parse between OSB and the iGaming segments, can you talk about spend per existing user versus newly acquired users? How much of a delta or maybe lower spend new users might have relative to some of your longer-term, maybe more VIP customers? Sure. So obviously, with the caveat that it's still early, I do think that the users we acquired in Q3 look a lot like customers we've been acquiring recently. Certainly, maybe not the first-year-in-state cohort, but very similar to the more recent cohort. So it seems like really the story is that after the first year or two, you do get some decline in customer LTV, but then it seems to plateau. It doesn't really seem to be lower in years four, five, six, and beyond. So that's kind of what we're seeing. But again, very early, we're basing this on, for most of these customers, only a month or two of data. So obviously, we'll see how that plays out as NBA progresses and things like that. But from what we can tell, it seems like they're very similar quality to who we've been acquiring. Great. Thank you. And then with respect to your 2025 revenue and EBITDA guidance range, what's contemplated at the high end versus what's baked into the low end? What's that $100 million EBITDA bridge? What's the delta there? The biggest difference is just customer acquisition environment because that's kind of the hardest thing for us to predict at this point. We feel very good about the models we have for our existing cohorts and have been very accurate in forecasting those. Obviously, other levers like fixed costs and marketing spend are controllable. So it's really much more what does the new customer volume look like and how does that end up affecting new customer promotion levels? Great. And then one final question here. Given the aforementioned customer-friendly results in October, have your handle expectations versus a quarter-ago call changed? In other words, would 4Q handle actually have gone up relative to three months ago given these outcomes and what might be stronger engagement? We have seen a little bit of evidence that handle can go up or down based on whether customers are winning or not, but it's actually not really that big a number if it is an impact at all. I think much more what we see is that people don't need to deposit as much more, but they tend to keep their betting levels at a pretty similar level, and on the margins, you see some incremental betting, but for the most part, people just continue to kind of bet as they've been betting at this point, so not something that we built into our assumptions. If there is any of that, it could be upside. Also, it could be some upside on the payment processing cost side because you don't need to have people depositing again if they have money in their account. So all those things could potentially create upside, but I think if it is, it's not very significant, so we haven't built it into the guide. Thanks, Jason. Ladies and gentlemen, as a friendly reminder, we ask that you keep it to one question. One moment for our next question. Our next question comes from Ben Miller with Goldman Sachs. Your line is open. Great. Thanks for taking the questions. I guess just on the '25 EBITDA guide, I was wondering if you could expand on what some of the embedded assumptions are in there versus last quarter and what some of those moving pieces are that leave the range unchanged against factors that may or may not be new this quarter. You obviously have a revenue guide versus prior expectations. It seems like you're mitigating some tax in Illinois. Are there any assumptions for Missouri? Any color around that would be helpful. Thank you. Sure. Yeah. So I mean, I think the general story is that in Q3, we kind of performed as expected, and Q4, outside of sport outcomes, all the fundamentals are pointing towards exactly kind of what we thought, maybe even a little bit better going into Q3 and Q4. So there is maybe some reason to feel more optimism. Obviously, we also got stung by sport outcomes, so I think between that and also wanting to be cautious on customer acquisition, we didn't feel comfortable raising the guide at this point. But we do see some really interesting things with Parlay mix being up 500 basis points year over year in NFL and NBA off to a very strong start from a mixed perspective that do give us some confidence that there could be some upside. But right now, we feel like with the data we have, this is the right place to be and felt like the real macro story was maybe a little upside, but more so that we really reaffirmed over the last couple of quarters all of the key fundamentals that led us to feel $900 million-$1 billion was the right number. Great. And then maybe just a big picture one, Jason. I'm curious your thoughts on the non-sports betting prediction markets and whether that's an opportunity or how you think about that from a product standpoint, from a competition standpoint, as either cannibalizing or an opportunity for OSB and iGaming? Thanks. Yeah. I think it's a very interesting thing. The market within that that's dominant is election markets, of course, and particularly during presidential elections. So I know there's a lot of tension on it over the last few weeks, and I do think there could be a place for it outside of elections, but that's really where the interest seems to be now from a customer demand side. So definitely something we're looking at in advance of next presidential election, and potentially there'll be an opportunity to look at something sooner. It is a different framework. It's not licensed as a betting product. It's licensed as a financial market. So it's definitely a very different thing. So we'll have to see where it fits in the priority list, but it is something we'll plan on looking at ahead of next election for sure. Great. Thanks so much. One moment for our next question. Our next question comes from Stephen Grambling with Morgan Stanley. Your line is open. Hey, thanks. I'm going to try to roll two into one here. One is just on the guidance for 2025. I guess what level of customer acquisition or user growth do you have embedded in the revenue guide? And then secondarily, you talked about the 500 basis points increase in Parlays within the football season. I guess what do you think is explicitly driving that, and is that going to carry over into other sports into next year? Thanks. Yeah. So great question. I think on the first one, as we noted, we are fairly cautious with customer acquisition from a promotional budgeting perspective, but we also are not counting on a lot of volume from customers that we acquire. It's mostly existing customers. So I think that's really been built up from years and years of cohort data, and we feel very good about those assumptions. And then, of course, as we noted, we expect structural hold to be around 11% next year. So that's another key assumption that we have. And then I think I'm sorry, what was your second question? Just as you think about what's the drivers of the 500 basis points, I think the increase in parlays, and does that carry over into other sports? Is there specific product changes? Yeah. So I mean, a lot of it is product. We've introduced a lot of new features. We have live SGP markets across NFL, NBA, and other sports now. So a lot of it is just product and product availability. I think we've really increased our abilities around merchandising and creating interesting player props and combinations of player props into prepacked parlays, and I think that's been a factor. So it's a number of things. Our marketing approach, it's a lot of different pieces moving towards that objective that have driven it. As far as does that carry over into other sports, definitely have some encouraging early signs in NBA that we're seeing. And for us, that's the other big one, right? Because it's the other big sport, but also it's the sport that has such a heavy SGP mix in general and is just naturally player-oriented as a sport. That's a big one. Baseball, we're also very excited about that being a driver of parlay mix in baseball too. We really pushed on touchdowns this year. I think home runs is a good analogy for that in baseball. Definitely a lot of translatable insights, I think, but obviously each sport is different too, so we'll have to see as each season starts how it goes. Great. Thank you. One moment for our next question. Our next question comes from Ben Chaiken with Mizuho. Your line is open. Hey, thanks. Jason, the elevated external marketing for 2025 totally makes sense, but I guess the question is, in 2024, you had a similar opportunity to acquire customers that you didn't see coming at the beginning of the year. How are you estimating that opportunity in 2025, a year plus out? And I think you said you're taking a conservative angle, but again, just more so, how did you quantify the magnitude of the opportunity for something that seems maybe hard to predict? Thanks. Yeah. I mean, I think because it's hard to predict, we really try to, from a cost perspective, approach it cautiously, but then in terms of the revenue, we would be counting on, not a huge year for customer acquisition. So we tried to kind of be cautious on both sides of the equation, and that's how you approach anything, I think, when it's hard to predict. The other thing I noticed is that the addition of Jackpocket, which really we only had for about half a year, a little over half a year, also makes a big difference. And this year, there were no big jackpots, so I think that's not normal. Last year, there were three, I think, billion-plus-dollar jackpots. So we also wanted to make sure that if we get some big jackpots in the lottery next year, that we have some customer acquisition budget for that. And just remember, even that alone, going from half a year-ish, a little more than half a year to a full year, is also more marketing and more new customers. So that's part of the story as well. Gotcha. Then just some back-of-the-envelope math. Is it fair to say you held light by about 500 basis points in October? I'm basically saying the 250 of hold divided by an estimated October handle on our end. Does that sound right? You are about right. Good math work. One moment for our next question. Our next question comes from Clark Lampen with BTIG. Your line is open. Thanks for taking the question. Jason, I wanted to follow up on structural hold rates. You called out 11 for next year. You're pacing towards 10.5. Hopefully, without sounding too myopic, why only 50 basis points of increase expected when I think a lot of the conversation we've had so far around product mix shifts and the momentum that you guys are seeing with packaged product, stuff like that, it all feels quite positive. Yeah. I think that's what we feel we have the line of sight to commit to right now, and it's more of how we view our commitment than what we really want to achieve. Our internal goals will certainly be higher than that. But as we think about what we want to guide and not even being into 2025 yet, just wanted to make sure that we really only committed to something that we are highly confident in based on what we know right now. How does micro-betting, I guess, sort of factor into that, if at all, also next year? And curious if you could give us an update maybe on the Simplebet integration and perhaps when we might start to see, I guess, some of the products that's sort of in pipeline starting to roll out. Thank you. Yeah. It's a great question. So I mean, Simplebet's been a partner of ours for a while. So a lot of this was, one, about bringing a cost in-house and, two, really being able to take it to the next level. So we do have a lot of micro-betting offerings now, but I think a lot of what we're going to develop going into next year will really be at the top of the market, and I think will separate us and really differentiate us on the live betting side. And it won't just be micros. There are all sorts of live betting and derivative markets that Simplebet will help us with. So we're very excited about that. I think as you think about the impact on hold, live betting does have lower hold rates. So as we mix more into live betting, it will naturally have some impact on lowering the overall average hold. But obviously, we believe it's highly incremental volume, so that's a good thing. And at the same time, the other lever is we do believe that there's places that we have the opportunity to move live betting hold rate up. So while as a whole, it's lower, we might be able to offset any of the mix shift and maybe even offset it to the positive with having actually higher hold rates within the live betting and pockets where it's not high enough today. So those are all things I think Simplebet will really help us with. And then obviously, on the pre-match side, we'll continue to push hard on Parlay mix. I think overall, we expect, as we noted, structural hold to go up, but it'll certainly be a mix of live betting and overall kind of performance on the pre-match side. Thank you. One moment for our next question. Our next question comes from Joe Stauff with Susquehanna. Your line is open. Okay. Good morning, Jason. I had a question. Maybe if you could describe maybe retention levels and what they look like between, say, an OSB and an online casino customer. The reason I ask is certainly within OSB, you have a significantly larger competitive advantage given your product and number of iterations and so forth and the amount of share that you have versus the online casino market that certainly seems finite today and more competitive. And so I was just curious about what does retention levels look like between, say, both of those customer cohorts? Yeah. It's actually not too different. The retention in sports betting is naturally a little bit better, but it's not as different as you might think. And from our perspective, we view our iGaming offering as top of the market. We have been rated the number one and number two ranked apps in product quality for DraftKings and the Golden Nugget brands, respectively. And we think our iGaming app is clearly head and shoulders the best product. So I do think that you're right. It's a bit more competitive, and so naturally, there's a little bit more fragmentation. But if you look at our share in iGaming, it's not that much lower than our share in sports betting, and we expect that to have some upside too as we continue to improve the product. One moment for our next question. Thank you. Our next question comes from Dan Politzer with Wells Fargo. Your line is open. Hey, good morning, everyone, and thanks for taking my question. I know a lot of the focus has been on the 2024 side of things, but one of the things I was looking back at is, at your investor day last year, you actually forecast revenue for 2026 at $6.2 billion. So as you think about that relationship, and maybe that could be just stale at this point, but as we think about kind of the path forward outside of 2025, the flow through and maybe the leverage as maybe you kind of look to exceed those prior targets, given there seems to be upside on revenue, how should we think about that kind of going forward? And along with that, sales and marketing, you guys did a lot of deals in 2020, 2021, probably rolling off soon. So I mean, is that also an opportunity as we think about kind of the flow through as we move past 2025? Yeah. I do think to your last point, that is an opportunity. And I'm glad you brought up the investor day. I think that we were a little conservative in the investor day in terms of the overall industry growth. I believe we were around 9% CAGR and flat share. So what we're seeing is that the growth is just much stronger. And as you noted, we're actually going to be where we thought we'd be in 2026 and 2025 with much stronger customer acquisition and continued growth. So I think there is some upside there. And obviously, that means that the flow-through is going to have to catch up as the growth slows down in the outer years. But I think right now, we're seeing really encouraging signs that the TAM is bigger than probably we thought when we did the investor day. As you noted, we're already a year ahead of where we thought we'd be. Thanks so much. One moment for our next question. Our next question comes from Brandt Montour with Barclays. Your line is open. Good morning, everybody. I'd like to dig in a little bit more on the 11% hold number. Jason, how do you think about that 50 basis points lift in terms of average Parlay mix versus average number of leg count improvement? And could you get there just by anniversarying the Parlay mix lift you're seeing today, understanding that there's differences in your product across sports? And then the last part of this question is with regards to your main competitor and the hold that I know that you see that they do, what would it take to get to something a little bit closer to what they're doing next year? Is that even possible, like a 12% or 13%? What would that take? Yeah, and to your first question, it's really mixed-driven. And I think we can get there based on just the mix shifts we're seeing, albeit, obviously, there's some assumptions around which sports they're likely to transfer into. For example, we are not expecting next year nearly the mix shift in college sports because they tend to be less player-prop oriented and therefore less parlay heavy, but with the kind of nuances aside, I think, yes, we can get there based on the mix shift we're seeing, and I think the path to 12%-13% is really mixed-driven. I mean, there's other things, of course, on the margin you can always do to improve your sharp modeling, improve your risk mitigation, things like that, but 90-plus% of it is just mix, so we're continuing to focus on that. It's been a real great point of success this year. We feel like we have a great plan going into next year to drive it even higher, and it's exciting to know that there's a clear path to getting much higher on hold rate, and we think that is actually a big upside lever of the business that maybe people aren't counting on. Excellent. Thank you. One moment for our next question. Our next question comes from Jed Kelly with Oppenheimer. Your line is open. Hey, great. Thanks for taking my questions. Just on iGaming, can you sort of talk about the promotional velocity, how that's trended over the last couple of quarters, where that's going into 2025? And then just on the you had a King of the Court promotion. I thought it was really good. Can you talk about any learnings or engagement and the ability to sort of do some type of a social parlay or social promotion again? Thanks. Thanks. Yeah. So I mean, on the King of the Court promotion, it's been a real big success for us. We've been very pleased with the results. And I do think, to your point, it's something we can build on in the future. We're always trying different things. Sometimes they work, sometimes they don't, but we try to build on principles of what works. So if we see certain types of promotions are working, we don't just say, "Hey, run the same promotion." We ask ourselves why and try to come up with other promotions with similar mechanics. So this was really a creation of a number of other things that we had seen working, and we had high confidence running it going into the season. So far, it's been a huge success. And then, sorry, what was the first question that you asked? iGaming promotional velocity? Yeah. It's been pretty steady year over year. New customer acquisition has been up, as we noted. So with that adjusted out, it's been pretty steady year over year. Each year, though, we continue to see a decline because same as sportsbook, as you have less and less new customers as an overall percentage of the mix, you're just going to naturally see decline. Thank you. One moment for our next question. Our next question comes from Barry Jonas with Truist Securities. Your line is open. Hey, good morning. With Missouri approving OSB, curious what states your eye next for OSB or even iGaming, and maybe specifically wanted to get your thoughts on Florida given recent comments from the Seminoles, maybe opening the door for others? Thank you. I mean, it's always hard to predict states at this point. Everybody's kind of now finally turning their attention from the election to the upcoming legislative sessions next year, and so starting to have a lot of those discussions, but I think if you kind of look at where we left off last year and some of the bills that got close, obviously got through one house in Texas, still some big hurdles there, but hoping that we can figure out a path. Georgia, same thing, got through the Senate, hoping there's a path there. Minnesota got very close to the goal line last year, so hoping that we can get that one across this year, and then on the iGaming side, I think New York and Illinois are obviously two big ones we're keeping an eye on and I think could potentially have some momentum. And then some others that I think could potentially get there in the next year or two are Maryland and North Carolina. So those are all states that we're looking at, but always going into it, you think it's going to be a few, and then inevitably, some of the ones you felt good about don't pan out, and then there's some that you didn't see coming that end up having a real chance of success and maybe getting over the line. So it's early. Just came off the election, but based on kind of where the momentum was and where we were last session, the last set of sessions, I think those are some of the ones to keep an eye on. Great. And any thoughts on Florida? Oh, very encouraged to hear those comments. We really have a ton of respect for Hard Rock and for the Seminoles, and Jim Allen's done a fantastic job and enjoyed spending time and getting to know him and his team. So we'll see how that all plays out. Obviously, Florida is a big state and something that we'd be very excited if there were a path to be able to offer our product to customers there, but not really up to us. We'll have to see what they want to do and how the discussions progress. And obviously, if there's anything material, we'll come talk about it. But at this point, I wouldn't say that it's very far along, and there's been a lot of speculation in the press, but really, I think it's pretty early stage. Great. Thank you very much. One moment for our next question. Our next question comes from Bernie McTernan with Needham & Company. Your line is open. Great. Good morning. Thanks for taking the question. Maybe just to start, with the expectation of $850 million of free cash flow for 2025, how should investors think about the use of cash, particularly for buybacks next year? And then just a follow-up on hold, we all can track what happens with certain game outcomes and how that, with favorites winning, how that can negatively impact hold. Is it possible to disaggregate the total impact on hold between what was going on with team outcomes versus player props in the quarter? Yeah. Let me quickly touch on the latter, and then I'll have Alan take your first question. We're not at this time breaking down the hold, but what you can probably guess is that it's a mix of both, so typically, when favorites win, it's good for the customer, and typically, when the big-name players get lots of yards and score touchdowns, it's good for the customer, so when you're seeing the backup tight ends and running backs get in the end zone in low-scoring games where the underdogs are winning, then typically that's good for the house. So that's how I think about it. It was a mix, and if you're going to see the type of result that we saw at the start of the quarter, it has to be because it was that bad. But when it swings the other way, it could swing the other way hard too. So a lot of time left in the quarter and obviously a lot of time left in the season. And Alan, do you want to touch on that $850 million in Free Cash Flow and how we're thinking about that? Yeah. We feel really good about having positive free cash flow, not just in 2024, but the 850 you mentioned that we're expecting in 2025. We're keeping our eyes on the markets. We expect to act responsibly, but you should expect us to be more active with repurchases in future quarters as we scale into our free cash flow and as we have more liquidity. Fair enough. Thank you both. One moment for our next question. Our next question comes from Michael Graham with Canaccord. Your line is open. Thank you. I just wanted to ask about one of your slides in the deck. You show you have 3.6 million MUPs at the end of the quarter and 9.3 million total customers. I just wanted to ask if you could update us on your strategies for reactivating customers who have not engaged recently. Is it just a matter of promotional spend, or are there other things you're doing? I'd say it's a great question. I mean, I think a really important thing, obviously, just core retention is important as the base gets bigger, and we view retention, activation, monetization as the ultimate keys to winning. Obviously, acquisition is very important too, but over the long term, it's about retaining and getting great usage and gameplay out of your customers, so definitely an important topic. I kind of look at it along two dimensions, so one are just the constant always-on type of tactics where if we see particular things that we believe either are going to lead to attrition or recent lapses in customers, we can trigger different types of CRM treatments and retargeting treatments that we'll go and try to get them to reactivate, and then the other vector, I would say, is really more seasonal around event-driven activation. So, think start of NFL season as an example or Super Bowl. And so, really thinking about how do you use those moments when you know there's going to be a lot of natural reactivation in the market to get not only additional reactivation, but also to make sure the natural activation you're getting as much of that as possible. I kind of think of the start of NFL season as a lot of people who maybe at one point signed up for more than one book are going to decide where they want to start playing this season. So you want to make sure it's with you. And obviously, as you do that season after season, they tend to not think about it and just come back to their favorite app. So that's a lot of what we try to do is really use those big moments to win our share of the activation and also try to drive incremental activation through CRM. Thank you, Jason. One moment for our next question. Our next question comes from Chad Beynon with Macquarie. Your line is open. Hi, good morning. Thanks for taking my question. Obviously, with the 30% growth for 2025, you have a lot of focus areas that you need to be dialed into. But Jason, I wonder if anything has changed just in terms of beginning to look at some international markets, or more importantly, when is the right time to start considering growing in other markets as top line might begin to slow if there's no legislation here in North America? Thanks. Yeah. I mean, definitely don't feel like it is a need. It's more of an opportunistic thing at this point, so it's not to say that if the right opportunity came about, we wouldn't pursue an international expansion strategy, but I don't think we feel like it's a need. We are still, you noted, growth and even without a ton of new states launching next year, we're still well easily into a Rule of 40 company with over 30% growth and around a 15% EBITDA margin, so definitely feel really good about where we are from a growth perspective and don't need to look to those things, but also, if the right opportunity comes along, we would be open to it, and I think we're staying patient and waiting for the right thing. Thank you very much. One moment for our next question. Our next question comes from Jeffrey Stantial with Stifel. Your line is open. Great. Good morning, everyone. Thanks for taking our question. Jason, I wanted to drill down into a comment you made early on in the call. If I caught it correctly, you said both the volume of users acquired and the sign-up offer per user acquired were both up year on year, though promotional reinvestment, as you note in the letter, was down about 300 basis points year on year. Is that mostly retention, bonusing, optimization, and structural hold expansion that's driving that improvement? And then strategically, should we think about the higher nominal sign-up offer as being mostly opportunistic in the current user acquisition environment, or how much is it maybe informed by more what certain competitors are offering? Thanks. Sure, so a couple of things I'd point to. One, definitely have seen some improvement year over year on the retention side, and two, even though, yes, we did see an increase year over year in new customer mix or excuse me, new customer volume, the mix actually shifted more towards existing customers just because of the growth of the retention side of the universe, so we did see both, I think, which is great, an increase, but also a shift towards a more mature customer base, and so those combinations ended up netting into some decline in overall promotion rate as well, so those are the big factors. But really, for us, the expectation is that even if we do continue to see more new customers in a rapidly increasing industry, we don't actually think that it will be at a level, even in our most kind of aggressive or, I guess, from a promotion standpoint, conservative estimates. We don't think it'll reach a level where the overall mix is still not going to continue to shift more and more towards mature existing users each year. So we should continue to expect to see that drive down promotion rate each subsequent year, barring maybe a new large state opening up, like if a California opened up or a Texas, that could obviously, in the short term, sway it. But from an existing state basis, we don't see that being the case. Great. And then just in terms of the second part of that question, the offer levels per user acquired, is that just opportunistically leaning in when the fish are biting, or is there kind of another reason to raise the per user offer? No, we're always experimenting. I mean, our overall new user offer and the overall promotion rate for new users has not gone up, but we're always kind of shifting in and out of different offers and changing things around based on what test results say. Great. Thanks very much. One moment for our next question. Our next question comes from Jordan Bender with Citizens JMP. Your line is open. Good morning. Thanks for taking my question. The original gross margin guidance for 2024 was 45%-47%. So as we think through the bridge, on one hand, Illinois is a negative, which you've noted. There should be some offsets. Game outcomes are one time, and Jackpocket should be actually positive, the gross margin. So I'm just struggling to get why gross margins are essentially in the same place in 2025, kind of blending those factors together. Is there anything else that we're missing here? I mean, it's really new user growth. That's been the thing that's been driving the overall promotion level to a point where we hadn't seen quite the level gross margin improvement we wanted. But remember, Q3, we did see a 300 basis points year-over-year improvement in gross margin. So it is definitely trending in the right direction. Thank you very much. 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. How much of the $55 million of promotion optimization was because of customer-friendly sports outcomes, and you just didn't have to retention promote quite as much to them versus an actual structural change in the promo strategy and playbook that we can run with going forward? No, it's really nothing to do with sport outcomes. It's really two things. One, some mitigation of Illinois from the tax increase. And two, we've recently made some real progress in identifying customers that are lower LTV that needed a lower level of promotion in order to make sense from an LTV perspective. So we made some optimizations there. And actually, very happy to say that that resulted in basically no change to revenue, but it did drive significant Adjusted EBITDA. So that's something that we really think should be more permanent. But obviously, we'll keep an eye on what happens and continue to adjust and test it accordingly. Thanks, Jason. I'm showing no further questions at this time. I'd like to turn the call back to Jason Robins for any closing remarks. Great. Thank you all for joining us on today's call. We are looking forward to a really strong finish in 2024 and are really excited and optimistic about 2025 and beyond. Thank you for your continued support, and we look forward to speaking with you again soon. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.