DraftKings Inc. Price & Performance (DKNG)

Good morning, everyone. 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 that 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 tracking 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 annual report on Form 10 ks filed with the SEC. Hosting the call today, we have Jason Robbins, Co Founder and Chief Executive Officer of DraftKings, will share some opening remarks an update on our business. Following Jason's remarks, I will provide a review of our financials. We will then open the line to questions.

I will now turn the call over to Jason Robbins. Good morning and thank you all for joining. Today, I'm excited to share our strong 2024 results our areas of focus for 2025, and why I'm enthusiastic about the next few years. We just wrapped up our thirteenth year at DraftKings and I am more confident than ever in our trajectory and ability to capitalize on the substantial opportunity ahead of us. My confidence begins with the year we had in 2024. For the year, revenue increased 30% year over year to $4,800,000,000 Adjusted EBITDA improved $332,000,000 year over year to $181,000,000 and free cash flow was positive for the first time in our history. We acquired 3,500,000 new customers at record low customer acquisition costs and increased our total customer base 42% year over year $10,100,000 I am also proud that our business is demonstrating strong operating leverage. While revenue grew 30% in fiscal year twenty twenty four, our adjusted operating expenses increased only 5% year over year when normalizing for costs related to our acquisition. We expect this to continue as our revenue growth remains strong while our expenses approach scale as we continue to exert discipline and leverage new technologies across the organization.

Looking further ahead to the future, I'm excited about a number of vectors that could even further accelerate our growth. Our structural sports book goal percentage is continuing to increase. And the long term ceiling could prove higher than we forecast. Additional online gaming legalization in The U. S. Appears inevitable and more a question of when, not if. And our newer verticals such as digital lottery courier are only in their infancy. DraftKings is at the epicenter of a megatrend. Real money online gaming is a large and growing industry with secular tailwinds behind it. We believe we are well positioned to capture significant share. And we haven't even begun to expand outside The U. S. And Canada which we could explore as a longer term opportunity. In 2025, one area of focus is expanding our lead in live betting. Our recent acquisitions of SimpleBet, Sports IQ Analytics, and Mustard Golf provide us with proven technology and analytical tools that will accelerate our product roadmap and bring the live betting experience to another level. We will also focus on growing and further integrating our emerging verticals, [indiscernible] Jackpocket, the number one digital lottery carrier app has proven to be an efficient acquisition for the DraftKings ecosystem.

The app recently cracked the top five in the entertainment category of the App Store in the Mega Millions jackpot reached $1,200,000,000 Jackpot is positioned to benefit from larger prizes more states and an expanded product offering that includes Scratch or Games. Lastly, we are focused on how we can intelligently deploy capital as our balance sheet grows. Now that we are generating significant positive free cash flow, we have more options available to us to maximize shareholder returns.

This includes optimizing our capital structure by exploring opportunities in the debt markets while maintaining a prudent approach to leverage. We will continue to prioritize returning capital to our shareholders. While considering all options available to us and targeting the highest risk adjusted returns. In closing, I'm very excited about our trajectory in 2025 and beyond. With that, I will turn it over to our Chief Financial Officer, Alan Owen. Thank you, Jason. I'll hit the highlights including our fourth quarter twenty twenty four performance and our fiscal year twenty twenty five guidance. Please note that all income statement ventures discussed except for revenue are on a non GAAP adjusted EBITDA basis. As Jason mentioned, we had an excellent 2024. I'm pleased to share that our fourth quarter was strong across our core value drivers. In the fourth quarter, we generated $1,393,000,000 dollars of revenue, representing 13% year over year growth. And $89,000,000 of adjusted EBITDA. Customer acquisition exceeded our expectations as newly acquired sportsbook and iGaming customers continued to increase year over year and our new digital lottery courier vertical benefits from the Mega Millions jackpot reaching $1,000,000,000 in late December. Customer engagement and retention were strong. Structural sports book hold percentage also continued to improve, increasing 80 basis points year over year to 11.2% for the quarter.

As our NFL parlay handle mix improved more than 600 basis points year over year. Promotional reinvestment outperformed our expectations in dollar terms. Adjusted gross margins of 45% reflect our improving structural sports book hold percentage and our optimization of promotional offers. Despite a headwind from customer friendly outcomes. I'd also like to take a couple of minutes to comment on the first quarter of twenty twenty five. We are off to an excellent start and that provides us incremental confidence in our fiscal year twenty twenty five revenue and adjusted EBITDA guidance ranges. In January, our core value drivers resulted in revenue and adjusted EBITDA that exceeded our expectations for the month with an actual sports book whole percentage of 11%. Additionally, months to date through February 11, our acquisition retention and engagement continued to be strong our actual sports book hold percentage was 13%. The Super Bowl, one of our 10 pole acquisition and engagement days, a successful event for the company. On Super Bowl Sunday, our customer acquisition was a bright spot as DraftKings sportsbook app reached number one in the App Store in the sports category, and number three across all apps. From an engagement standpoint, we set our own daily record for sports book Candle at $436,000,000 Finally, that mix trends were favorable as same game parley handle increased approximately 40% year over year.

Which ultimately resulted in the highest sports book gross gaming revenue day in the history of the company. Now moving on to our fiscal year 2025 guidance.

In November, we stated our expectation that fiscal year 2025 revenue would be in the range of $6,200,000,000 to $6.6 Today, we are raising the low end and midpoint of our range. We due to the investments that we are making into our live betting offering, including our acquisition of SimpleBet. We expect our live betting initiatives will be neutral to adjusted EBITDA in 2025 and positive to adjusted EBITDA in 2026 and beyond. We now expect 2025 revenues of $6,300,000,000 to $6.6 which represents year over year growth of 32% to 38%.

We had also shared in November our expectation that fiscal year twenty twenty five adjusted EBITDA would be in the range of $900,000,000 to $1,000,000,000 Today, we are reaffirming that guidance range.

It is early in the year, but the performance so far has been excellent across our core value drivers. Importantly, our revenue and adjusted EBITDA guidance for fiscal year twenty twenty five does not include the benefit of favorable year to date support outcomes nor the company launching mobile sports betting in Missouri.

In terms of additional fiscal year twenty twenty five detail, We continue to expect structural sports book hold percentage of approximately 11% and now anticipate a sports book net revenue margin in the range of 7% to 7.5%. We now expect our adjusted gross margin to be in the range 46% to 47% which is slightly higher at the midpoint relative to our expectations last quarter. We continue to expect stock based compensation expense to represent approximately 6% of revenue. Finally, we expect the bridge between adjusted EBITDA and free cash flow to be $100,000,000 and therefore expect to generate free cash flow of approximately $850,000,000 in five. That concludes our remarks and we will now open the line for questions.

Thank you. Our first question comes from the line of Sean Kelly with Bank of America. Your line is open. Hi, good morning everyone and thank you for taking my question.

Jason or Alan, wanted to start off with trends on the volume and handle growth.

Side of the business. So we saw handle growth across the industry slow a bit in the fourth quarter. And I just wanted to know know, how much of a concern is that for you? What do you think can drive reacceleration in twenty twenty twenty five? And is it pickup necessary to kind of reach your outlook as you stated here? Thanks, Sean. Appreciate the question. So definitely a lot of factors I think can affect numbers that really are kind of masking reality. So not a huge thing, but for example, in fourth quarter, there was one less NFL game this year in 2024 versus 'twenty three. So things like that can make a difference. But we think probably the biggest impact was just distraction around the election. Handle growth is still good, but it was a little less than what we're seeing now. I mean, the reason I think we confidence '25 is we've seen a pretty rapid acceleration HELDL growth. You saw the same thing with some of the DraftKings. NBA was down a little bit. It's bounced back quite a bit in the first quarter. So I think same thing on our end. We've seen the handle growth accelerate.

Since the elections passed and especially into the year.

Great. And if I could just a follow-up, but on the strategic side, Jason. One, there's been a lot of news flow out there and buzz around event contracts and prediction markets. Entering the sports landscape. So I appreciate it's very early here and this has been a moving target, but just sort of what's DraftKings DraftKings take here? This something you'd get into or what can kind of protect or differentiate you from that kind of offering?

Yes. I do think you're right. It's early. We are watching it very actively. It's certainly something that we have keen interest in seeing how it plays out. So I think there's some in the next couple of months, sixty days or so, there's going to be a CFTC ruling and all sorts of other things. I think we'll know a lot more over the next few months.

Thank you.

Thank you. Our next question comes from the line of Stephen Gram with Morgan Stanley. Your line is now open. [indiscernible] thanks for the incremental detail on the sports book. The net revenue target looks like you're assuming a fairly modest reduction in promotional intensity at least as a percentage of GGR. If we zoom out, what are some of the major puts, takes that will influence the promotional reinvestment here and how that Intensively may evolve longer term. It's sorry, you're talking about 2025? Yes, 2025 versus 2024. And then I guess if we think about how that will I guess I would imagine trend lower as the industry matures, but wondering if that's kind of the right case? We expect quite a decline in in our promotional intensity. So I think maybe our analysts can work with you offline and help you on that. But I think we're expecting a pretty meaningful decline in promotional intensity in 2025.

Got it. So I'll follow-up with that. Maybe Maybe then one more that I'll sneak in. Obviously, started the buyback during a period where there was tougher hold. How does volatility and hold impact your willingness to buyback? And is there any specific approach to buyback either consistent or opportunistic as we think about how you will deploy capital going forward?

Yes, Stephen, I'll take that. We're going to be fairly programmatic with it. We've communicated in the past that we'd like to tie it to our free cash flow. And we're just going to be very consistent quarter over quarter. Great.

Thank you.

Thank you. Our next question comes from the line of David Katz with Jefferies. Your line is now open.

Thanks. Good morning, everyone. Going back to a question I've asked a whole bunch of times, but it feels more appropriate now, which is around in play betting. Can you just discuss the puts and takes and trajectory around in play in The U. S. As you see it. Toward getting to the kind of volume levels that mix that we see, for example, in Europe?

I think that there's a couple of things. One is obviously the product and we've made a tremendous amount of headway, but also still feel we have a lot more we can do there. Very proud that we had one of the by far industry's highest uptime for markets, including in play during the Super Bowl and so that's a big area of focus. Obviously, if the markets are or not, people can't bet. Secondly, I think beyond the product really working with the broadcasters and the streamers to try to get low latency broadcast and streams available for customers that want to in play Bet on a more micro basis. It's hard when you're twenty, thirty seconds behind It's almost makes the experience you have to play just on the app instead of watching a game, which I don't think is as good and certainly not what the broadcasters and leagues want. So that's something I think that can help too. So really for us, it's both of those. It's working with the other stakeholders industry to help create an ecosystem that allows the customer to maximize their experience and then making sure on our end we're building the best products and making sure they're up and running when the want to make bets.

Perfect. And if I can just follow-up quickly for Alan. My sense is there may have been an urge to raise the guidance given the really strong start we've seen so far year to date? How did you sort of think about the urge and resist the urge? I think it's very early in the year. And we don't feel any obligation to get ahead of the numbers. Seeing some really good positive strong trends. But let's stay consistent with what we've said in the past and let's see how the year progresses.

Yes. And remember, we're providing a range too. So So there's already some there's some moving parts built into that. So I think as Alan noted, it's very early in the year. We feel like we still are very [indiscernible] hopefully, there's some upside there. But as we saw in Q4, things can swing the other way too. So didn't want to get out ahead of our skis.

Appreciate it. Thank you.

Thank you. Our next question comes from the line of Carlo Santarelli with Deutsche Bank. Your line is now open.

Hey, guys. Good morning. Jason Allen, whoever wants to take this one.

I think if you just look at the 35% revenue guidance, and factor in kind of the improvement in structural hold from a gross perspective, you kind of have a 17% head start on OSB revenue for the year. I would imagine that the handle component plus the the promotional savings and the impact that would have on your net revenue is going to be should amount to something that's slightly higher than the 35% aggregate target with a little bit of drag from perhaps OSB and and obviously some moving parts in the other line?

Is that a fair kind of reconciliation?

Yes. I think that's pretty good. I mean, listen, we do feel there's some upside, obviously, we provided a range on the guidance and we're always out there trying to beat it. We have a number of initiatives planned throughout the year, both to improve top line handle in GGR and also to improve our promotion efficiency Obviously, we'll have to see how customer acquisition performs. That's been something that's been better than expectation, which is great for the long term. But can drive promotions up in the meantime. So lots to do, I think. Also lots of upside. And for us, I think it's really about making sure that we put a prudent guide out there, but also have a number of initiatives be Helpful.

Thank you. And then if I could just one follow-up on the adjusted sales and marketing. Clearly, some activity later in the year, some acquisition activity, etcetera, that kind of drove those costs up year over year. How are you guys kind of thinking about that line for 2025? Is that something we could expect could come down somewhat or even perhaps meaningfully as we move through the year? [indiscernible] The way we think about some of those costs, especially in the long term, is we are trying to optimize around an EBITDA margin ultimately of close to 30%. And so you're going to see some fluctuations up and down as we pick up at acquisitions and we're going to optimize the organization and continue to focus on streamlining our organization and our fixed cost to get to a place where we can deliver the EBITDA margins we've communicated.

Thank you. Our next question comes from the line of Robin Farley with UBS. Your line is now open. Thank you. Just looking at your guidance, this is I think the second quarter in a row you raised revenue guidance for '25 but the EBITDA guidance hasn't changed. And presumably, it's You're pushing to the live betting space Can you help us think about what that would be adding presumably to 2026? Thanks.

Yes, it's a great question, Robin.

So we haven't quantified [indiscernible] we do think that while EBITDA neutral this year, investments we're making into live betting will be EBITDA positive in 2026 and beyond. So, you're absolutely right, but we haven't quantified it at this time.

Okay. And then as a quick follow-up, think it was in your shareholder letter, you mentioned exploring opportunities in the debt markets now that you have cash flow. Is the suggestion there, would that be for to use for additional share repurchase or kind of how should we think about the opportunity to use that? Thanks.

I think initially, it'll just be for general corporate purposes and just to establish our presence in the debt market with no specific focus in mind on it. Long term, we'll obviously look at the optimal way of of growing the business and the right way to use our balance sheet to do so.

Okay, great. Thank you.

Thank you. Our next question comes from the line of Robert Fishman with MoffettNathanson. Your line is now open.

Hi, good morning. Given the continued strength in customer you share more about the current levels of population penetration in some of the older vintage states and how that compares to some of your newer states? Maybe just the runway for higher penetration in the years ahead I mean, as you may remember, and I think this is probably why you're asking, some of the earlier states didn't ramp as quickly as the newer states have. So So it took a little longer to get to that population penetration. Right now, our oldest states typically are at the highest in some cases of our overall states for population. Penetration, particularly states like New Jersey, which even though took a little longer to get there, has been around for a while. That said, they're still growing. I don't know where the ceiling could be. And for us, I think it's just about continuing to build a product that we think appeals to a wide variety of customers and provides great entertainment and hopefully as we do that, the audience will grow. I do think there's some secular tailwinds behind us. I think younger generations tend to participate more in these types of activities and also tend to do it more online and on mobile.

So I think time is on our side in that sense.

Maybe a quick follow-up then. Can you discuss the ROI of your sponsorship strategies? You saw that record sign up from the Tyson call Netflix fight. So how does this change your approach thinking about 2025?

We're always looking for opportunities like that. That one to be fair, I mean, it was a it was kind of lightning in a bottle. I don't think anyone Tyson, Jake Paul fight to have the mainstream appeal and to get the audience. It did include they had unbelievable traffic to the point where it was almost hard to keep up. So So that was one that was sort of a pleasant surprise. And you're not going to always hit on that. But I think for kind of us, the way we look at it is how do we make sure that we're establishing a relation [indiscernible] if they hit big, then great, but we don't want to count on that. It's really about establishing a good framework so that even in a kind of base case scenario, we get great ROIs. So that's how we think about it. And then if you happen to have the upside from something like what happened with Tyson fight, then great. But that's not going to happen all the time. It's not going to happen very often. So you can't count on it. Thank you. Thank you. Our next question comes from the line of Ben Miller with Goldman Sachs.

Your line is now open.

Great. Thanks so much for taking the questions. I wanted to follow-up on the prior live betting questions given it was highlighted as an area of focus in 2025. Just curious how you think about that how you think about greater adoption of live betting translating into the model between wallet share, growing wallet share with existing customers versus potentially unlocking I think it's a big part of it, right? Most customers are not going to come and make the first bet as a live bet. They're going to bet pre match. So it really is, as you noted about, getting our existing customers to continue to adopt live betting. And if you look at the trends overseas, that's sort of the story, right? It grew each year from more and more existing customer adoption to the point where now it's 70%, 80% of revenue in The UK. For digital sportsbooks. So definitely feel like there's that kind of upside here. The U. S. Sports are very well built for in play betting. We saw a lot in the Super Bowl more this year than we had in prior year. So that was a very encouraging sign. And I think as time goes on, we're going to better create products that appeal to customers.

And I just think also the natural evolution and maturity of the customer base, people are going to try new sports, they're going to try new bet types and that will lead more life betting.

Great. And then maybe just as a follow-up, I'd love just on the DraftKings Plus subscription. Just any learnings, early learnings from the pilot in New York and how that translated into any change customer behavior? And the second part of that is just how you think about the economics of that offering between subscribers versus non subscribers?

Yes, it's a great question. So it's really early and it's a very limited pilot. We don't have enough data yet at this point, but it's something that I think could potentially have some real interest amongst the broader population from what we're early on seeing. I think we wanted to make sure because we don't know what the economics are going to shake out as a part of why we kept it a very limited pilot is we didn't want to have a bunch customers sign up for something that we then had to materially alter the economics, because it wasn't backing out. So that was kind of the thinking on that. And really, we're going to kind of let this one run, gather that data and then take a step back and say, is this something we want to continue to pursue and what tweaks, if any, do we need to make to the program before we roll it out to a broader audience?

Great. Thanks so much.

Thank you. Our next question comes from the line of Joe Stoss with Susquehanna. Your line is now open.

Thank you. Good morning. Jason, I was wondering if You can give us what you can, but your summary views on the state budget process thus far in terms of new markets, potential new markets or efforts to reduce gray and black markets and taxes And then I wanted to ask about to think about the timing of how you layer in say new live products throughout 2025? Is it chunky for instance before March Madness? Like what how to think about that?

Yes. So, on the first question, [indiscernible] kind of sausage making period where going to see lots of news come out but there's a whole lot of things that happen between now and when the ultimate decisions get made on which states want to move forward with new legislation and anything else that happens in other states including tax decisions. So we're obviously right in the thick of it with our lobbying team trying to make sure that we're getting our points made and that we're helping push forward policy that we believe is the correct policy, which is to have broad legalization with reasonable regulations and tax rates so that operators like us are able to compete with the ramp in a legal market, which is generating billions and billions of dollars every year In fact, what's really been interesting is the degree to which the online casino illegal market has grown over the last few years and I think that's catching the attention of a lot of lawmakers. It's actually a very similar story to what happened with sports betting where a lot of the impetus for legalization came from the fact that it was already so such a rampant activity in the illegal market and so many people were already doing it that it made sense to protect consumers and generate tax revenue.

So I do think more and more policymakers are thinking about those things and are becoming aware of size and scope of that illegal market. So, we're going to see how it plays out over the next [indiscernible] and obviously there will be lots of news and headlines, but in the end, there's quite a bit between now and when it ultimately resolves in each of these states. That said, I do think we're going to have a little bit better year terms of legalization. Last year was a tough year because it was the election, and and typically getting votes on gaming during an election year is hard. People are just distracted campaigns and also don't want to take up any sort of issue that they even be mildly controversial. So I think there will be a little bit more success this year, at least that's my hope. And then, sorry, what was your second question again?

Yes, just knowing the effort on the live side of things in terms of new products and so forth. Yes, how to think about sort of the The timing.

Yes. So we will introduce things throughout the year. It's certainly though the case every year that we try to times certain launches around big events or new season launches So you'll see some stuff roll out at the beginning of baseball season. You'll also see some things and this is true across our product. The biggest time of year for us is to roll things out just before the NFL season. A lot of planning and effort goes into making sure that we have the best possible product for NFL and then for NBA after that. So that's I think it will be pretty steady, but you will see some big rollouts right before the seasons, particularly right before the NFL [indiscernible] can I squeeze just one quick one? Could you just remind us March Madness of last year Overall kind of [indiscernible] say favorable versus unfavorable?

It was unfavorable last year. Thanks a lot.

You're welcome.

Thank you. Our next question comes from the line of Clark Lampkin with BTIG. Your line is now open.

Good morning. Thanks for taking the question. Jason, I wanted to ask a question around structural hold trends. I'm curious if you could give us a little bit more color around the assumption for '25 and what's embedded from a mix shift standpoint. You obviously called out some favorable data points around the Super Bowl with same game parlay trends. Have you seen more traction as that product has improved or shifts in engagement Just curious, if you could give us a framework for the leading edge of player behavior in response to those products and whether that's been consistent with embedded expectations?

Yes. Actually, it's been a little bit better than expectation today, which is why we baked in that structural hold in our last guide. I should say better than expectation today better than expectation that NFL season before in terms of what we thought would happen before the NFL season. And NBA has continued too. We've seen great bet mix improvement year over year in MBA and lot of the learnings that we got in terms of how to better not just what products cost customers want, but also how to market and merchandise those products in a more effective way. I think really paid dividends both for NFL and thus far through NBA season. So That's been a lot of great work on our team's end to do that. And it seems like there's still upside because each passing week the numbers are continuing to improve. So So we're very bullish on the outlook for structural hole for 2025 and hopefully we can do even better.

That's great. I wanted to as second question, address, I guess, capital allocation and potential international expansion. You've been consistent for a while in saying that you think DraftKings should be a global enterprise but the mention this time around seems a little bit more deliberate. It came up in your prepared market movements, opportunities that are presenting themselves to you now that were maybe we're at a point in time with the progression of The U. S. Business and where you are over the next couple of years that it's now just more of a right place, right time situation. Just curious if you could give us any color on that I mean international has always been of interest. I don't think we deliberately meant to be an stronger on it this quarter than we ever have. It's kind of the same story actually, which is our primary focus. Of course, remains to be the U. S. OSB and I gaming space. We've dipped our toe into some other places like digital lottery Courier that we are very excited about and feel like have a lot upside within that overall U. S. Gaming strategy, online gaming strategy. And it is true that a lot of the technology we are building could be useful overseas but it doesn't mean that that's something that we're looking at in the immediate term.

We're going to be more deliberate and opportunistic. So I think for us, it's less like, hey, do we need to do something on the international should it be five years from now and more, let's just continue to keep our eye on that and if the right opportunities emerge, be ready to go for it. But that doesn't mean that that's something that we have in the near term horizon. It's much more opportunistic than that. We're very fortunate that we feel like we have a huge runway for us in The U. S. And also in Canada. So there's really not like a burning need to rush international So there may be a day where we say, look, this is something we just have to do and we're going figure it out over the next twelve months. But right now, it's much more, hey, is the right opportunity out there? And if not, we'll just continue to focus on The U. S. Perfect. Thank you very much.

Thank you. Our next question comes from the line of Dan Polak with Wells Fargo. Your line is now open.

Hey, good morning, everyone. First, how do you think about the power of your brand right now for both sports and iGaming? And do you think that there's additional opportunity, if at all, for additional brands in either vertical and I think about Golden Nugget and all the success you had there is the obvious example. But figured I'd just check on your and where you're headed at there. Yes. I think your Golden Nugget has been a great success and also, for the first part of your question, I think the DraftKings brand is incredibly strong, not just with sports, but with iGaming as well. And made a ton of headway building our brand in the iGaming market. And I also think we've really improved the Golden Nugget online product, which I think has helped improve that brand and has really helped the share and the growth trajectory of that brand as well. So I don't see any reason we couldn't plug that into other front ends in terms iGaming. It's not something we're actively looking at at the moment. But I do think we've built that capability and proven out that model. On the sports side, I think it's probably less proven, doesn't mean it couldn't work.

But there are reasons to believe that it's more effective strategy in iGaming than it is in sports.

So that's why we focus more on iGaming today.

Got it. And then I think in your colleagues, you can kind of back in with gaming taxes where percentage of revenues. I was coming out to something around 37%, 38% As I think about your adjusted gross margin targets for 2025, are you anticipating that gaming taxes go up and maybe as you think about kind of that out of your guidance you laid out a while ago, I mean, as we sit here today, what are you baking in in terms of taxes and maybe even some of the other costs within your cost of goods sold like platform, cost market access fees or processing fees? Yes, it's a bit lower than what you said. So it's not 3738%, but what we've assumed for 2025 is no change in taxes. It's kind of the same approach we're taking on legalization or anything legislatively that until we have clear line of sight that something needs to be changed in our forecast, we're not going to there's no reason to bake in higher tax rates because no state has actually increased our tax rates this year. So obviously something that could change and something that we are very focused on from a government affairs standpoint, but from a guidance standpoint, we didn't bake in any additional legalization.

We don't have the Missouri launch in there and we don't have any additional changes in terms of tax and regulation either. Thank you so much.

Thank you. Our next question comes from the line of Jed Kelly Oppenheimer. Your line is now open.

Hey, great. Thanks for taking my question. It seems like your jack pocket cross sell is being pretty effective Like does that give you a sense that you'd want to like invest more in jack pocket in states where sports betting or iGaming not legal? And I know you've recently just touched on the NBA product earlier. Can you give us an update on where you think your NBA product is relative to your chief competitor? Thanks.

Yes. I think Shasta has been great in terms of both the cross sell and also we had really strong customer acquisition during this last million dollars $1,200,000,000 jackpot run. So I do think that there's room to invest more there. And I think that for us, it's probably more effective in states where there's legal sports betting and iGaming because the LTVs in the immediate term are going to be higher because we can cross sell right away. But certainly, if there's states that we think we can efficiently build a customer base similar to what we're doing in DFS, I think that's also a great opportunity and one of the reasons that we feel excited about Chat Pocket. In terms of the NBA product, we think our product is as good as anyone in the market right now. And I think that that is probably something I wouldn't have said a year or two ago.

I think definitely not two years ago, maybe a year ago. But right now, I think it's as good if not better than anything else out there. So really excited about the progress and proud of the progress our product and technology team has made. And I actually think there's a lot of upside, particularly on the live side. Where I think we have a best in class clear advantage over the rest of the industry.

Thank you.

Thank you. Our next question comes from the line of Brent Montour with Barclays. Your line is now open.

Good morning, everybody. Thanks for taking my question. Jason, I want to drill in on one of the comments you made in your prepared [indiscernible] Could you just maybe flush that out for us? Is that just a mix comment? Is that a comment that you just sort of see your chief competitor sort of growing their parlay mix ever higher. But just the ceiling part is the part I'm focused on.

Yes.

It's really because of the amount of increase we saw this year. I think that If you sort of look at the curve and how much it's improved and obviously there's a lot of actions we've taken, so it's not just natural evolution, but it doesn't look like it's slowing down. It looks like it's accelerating. So So I don't know where the ceiling is, but we are fairly conservative in our multi year plan. So I think that We haven't actually quantified it, so I don't give a number, but we were more conservative certainly than some of the numbers that have been thrown out by our chief competitors. So So I think that gives us confidence too that if they're seeing line of sight to that, that that's probably achievable for us too.

Okay, great. And then just a quick follow-up on iGaming. Curious if you're having any concerns about what you're seeing in the promotional environment out there and if that's something that could get that could heat up further if we don't get any new state legislation over the next couple of years?

I don't think so. I mean, iGaming actually is declined year over year in '24 in promotional intensity. Now it didn't go down as much as sports, but that's more a function of the fact that there hasn't been a lot of new iGaming legalization in the last three, four years. So naturally with more of the newer markets sports having launched in the last couple of years, they're going to have much more decline since their customer acquisition relative to existing customers is much stronger in the early years. So I think that's really what you're seeing in terms of the difference between the two, but both sports and iGaming went down and I expect iGaming to continue to decline in 2025.

In terms of promotional [indiscernible] Thank you. Our next question comes from the line of Barry Jonas with Truist Securities. Your line is now open.

Hey guys, good morning. With the new higher Illinois tax in place for a bit now, can you talk about or maybe try to quantify what you've been able to do to offset the hit there? Well, we've done some things like reduce promotion intensity and marketing in the state. So that has helped. Obviously, it didn't completely offset it, but the business has done so well from other perspectives that actually were able to continue to maintain that $900,000,000,000 to $1,000,000,000 guidance even with the Illinois tax hit. So feel very good about that. And very excited about the overall trajectory of the business. And like I said, we're able to mitigate some of it, but we weren't able to mitigate all of it in Illinois.

That's helpful. And then just with the Missouri launch, can you maybe frame or even quantify what the investment, what we shouldn't expect for the investment this year? And it'd be helpful to frame it relative to prior Simulisize launches in the past from a CAC perspective?

Yes. We're not putting an exact number out there now because the timing is still up in the air. The earlier in the year, it is the less sort of overall on the year because we'll have more time to make it up, the less of an EBITDA hit. So we're going to wait until they have a launch date set, but we put a number out there. But as soon as they do, we'll we'll share that with everybody. Thank you.

Thank you.

Our last question comes from the line of Ben Chaiken with Mizuho. Your line is now open.

Hey, thanks for taking my questions. First question was on payments.

This one might be a little bit out there, but I'll take a shot.

With what feels like both social and political acceptance of cryptocurrencies, do you envision a time when DraftKings would accept stablecoins as a form of payment, the idea being reduced expenses to move money in and out of wallet. Among other items and fully recognizing you may have other fish to fry, but any color you can provide or thoughts would be great.

No, it's Yes, it's a great question. I mean, it's certainly something we're looking at. It's not entirely a product roadmap question. It's also getting regulators comfortable with it because regulators typically are cautious around crypto and states, obviously, at a federal level. There's a lot of pro crypto deregulation, I think, coming. But it's certainly and that certainly affects the state's perspectives. But they still need to get comfortable. So there are only a handful of states that are open to it at the moment. So it doesn't feel like a huge opportunity, but if that grows to a larger number of states, it's something that I think we take a more serious look at.

Understood. Appreciate it. And then I hear your comments on the promotional intensity [indiscernible] to external marketing spend in '25 My guess is that you're allocating some to Jackpocket and then also to embrace the stronger customer acquisition environment we've seen in the last few quarters. I guess Am I thinking about that correctly? And then any high level cadence or waiting through the year to be aware of?

Yes.

So we have added a little and it's really jack pocket. OSB and iGaming is going to be pretty steady year over year. It's really jack pocket, and that's going to be a little dependent on the jackpot environment we saw a pretty strong customer acquisition during this last Mega Millions run. So want to make sure we're prepared to add a lot of really efficient customers if that happens. Which I think it will. I mean, at least there'll be one or two in 2025, hopefully more because I don't know if everybody knows this, but they decreased or excuse me, increased the price of the ticket which means that people either spend more, which is great, or people will spend the same, but get less tickets, which then means jackpots will hit less, which means they'll roll more and get bigger. So think that's actually really positive development for the digital lottery market.

Very helpful. Thank you.

Thank you. This concludes the question and answer session. I would now like to hand the call back over to Jason Robbins for closing remarks.

Thanks everybody for joining us on today's call. We're really excited about the trajectory for 2025 and beyond and thank you for your continued support. Thanks.

This concludes today's conference call. You for your participation. You may now