DraftKings (NASDAQ:DKNG), the digital sports entertainment and gaming company known by its ticker DKNG, has reported a significant increase in customer acquisition and revenue growth for the second quarter of 2024. The number of new Online Sports Betting (OSB) and iGaming customers surged by nearly 80% year-over-year, while marketing costs saw a decrease of over 40%. With the integration of Jackpocket progressing smoothly, DraftKings anticipates positive adjusted EBITDA from the acquisition in fiscal year 2025. The company also announced a share repurchase program of up to $1 billion and maintains its adjusted EBITDA forecast of $900 million to $1 billion for fiscal year 2025. Despite raising its fiscal year 2024 revenue guidance to between $5.050 billion and $5.250 billion, the company adjusted its EBITDA expectations to $340 million to $420 million, mainly due to an increase in the Sportsbook tax rate in Illinois.
Key Takeaways
- DraftKings reported a 26% year-over-year revenue growth in Q2, reaching $1.104 billion.
- The company saw a nearly 80% increase in new OSB and iGaming customers.
- Marketing costs were reduced by over 40%.
- DraftKings plans to introduce a gaming tax surcharge in high tax states starting in January 2025.
- The company expects a positive adjusted EBITDA from the Jackpocket deal in fiscal year 2025.
- A share repurchase program of up to $1 billion was announced.
- Fiscal year 2024 revenue guidance was increased to $5.050 billion to $5.250 billion.
- Adjusted EBITDA guidance for fiscal year 2024 was revised to $340 million to $420 million.
- DraftKings is optimistic about generating $900 million to $1 billion in adjusted EBITDA in fiscal year 2025.
Company Outlook
- DraftKings plans to continue its strong customer acquisition trend.
- The US online gaming opportunity is seen as larger than previously anticipated.
- The company is investing in new features for its Sportsbook and iGaming platforms.
- DraftKings anticipates becoming a cash taxpayer in 2025 or 2026.
Bearish Highlights
- The Illinois gaming tax increase has led to a revision of the adjusted EBITDA guidance for fiscal year 2024.
- New customer promotions may impact revenue and EBITDA despite marketing cost savings.
Bullish Highlights
- DraftKings is experiencing strong customer acquisition without signs of consumer weakness.
- The integration of Jackpocket and the introduction of bet-and-watch for NFL streaming are expected to enhance the user experience and drive growth.
- GNOG has been a positive contributor to customer acquisition since migrating to the DraftKings platform.
Misses
- There is a noted decline in the quality of acquired players over time, although it tends to stabilize.
- The company is monitoring customer feedback closely concerning the implementation of a surcharge.
Q&A Highlights
- CEO Jason Robins discussed the surcharge as a competitive measure against black market operators and a way to raise awareness about high tax rates.
- Robins emphasized the need for regulators to address the illegal iGaming market.
- DraftKings does not plan for organic expansion into Latin America, focusing instead on the US online gaming market.
- The company is the partner of choice for tribes, with several partnerships in place, including with the Pequot Tribe in Connecticut.
DraftKings' CEO Jason Robins expressed optimism for the future, citing the company's strong performance and strategic initiatives. With the upcoming NFL season, new features, and continuing customer acquisition efforts, DraftKings is positioning itself for sustained growth and profitability in the competitive online gaming industry.
InvestingPro Insights
DraftKings (DKNG) has demonstrated robust revenue growth and customer acquisition, which is reflected in the real-time data showing a significant 57% increase in revenue over the last twelve months as of Q1 2024. With a market capitalization of $15.28 billion, the company's growth trajectory is notable, particularly considering the 52.67% quarterly revenue growth in Q1 2024. These figures underscore the company's successful expansion and market penetration.
InvestingPro Tips indicate that analysts are optimistic about DraftKings' prospects, expecting net income to grow this year and predicting the company will become profitable within the year. This aligns with DraftKings' own revenue guidance and plans for positive adjusted EBITDA. It's also worth noting that while the company has been trading at a high Price / Book multiple of 20.73, signaling a premium valuation, it operates with a moderate level of debt, which may offer some financial flexibility.
For readers seeking a deeper dive into DraftKings' financial health and future outlook, there are additional InvestingPro Tips available at https://www.investing.com/pro/DKNG, providing further insights into the company's performance and stock valuation.
Full transcript - Diamond Eagle Acquisition Corp (DKNG) Q2 2024:
Operator: Good day, and thank you for standing by. Welcome to DraftKings' [First Quarter] (sic) Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, today's conference is being recorded. I would like to turn the call over to your speaker today, Alan Ellingson, DraftKings' Chief Financial Officer. Please proceed.
Alan Ellingson: Good morning, everyone, and thank you for joining us today. Certain statements we make during this call may constitute forward-looking statements that are subject to risks, uncertainties and other factors as discussed further in our SEC filings, that could cause our actual results to differ materially from our historical results or from our forecasts. We assume no responsibility to update forward-looking statements other than as required by law. During this call, management will also discuss certain non-GAAP financial measures that we believe may be useful in evaluating DraftKings operating performance. These measures should not be considered in isolation or as a substitute for DraftKings' financial results prepared in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings release and presentation, which can be found on our website and in our quarterly report on Form 10-Q filed with the SEC. Hosting the call today, we have Jason Robins, Co-Founder and Chief Executive Officer of DraftKings, who will share some opening remarks and an update on 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.
Jason Robins: Good morning, and thank you all for joining. There are five key points that I'd like to focus on during our call today. First, we are achieving strong and efficient customer acquisition. New OSB and iGaming customers increased nearly 80% year-over-year, while cap declined more than 40% year-over-year in the second quarter, a period with no new state launches. We anticipate the healthy customer acquisition environment to continue through the back half of the year and possibly beyond, which may indicate that the US online gaming opportunity could be even larger than we previously thought. Second, we believe we have a reasonable solution for high tax states, including Illinois. We plan to implement a gaming tax surcharge in the four states that have multiple sports betting operators and tax rates above 20% starting January 1, 2025. We believe additional upside potentially exists for adjusted EBITDA in 2025 and beyond from this gaming tax surcharge. Third, the Jackpocket integration is off to a great start. We are on track to hit the multiyear guidance for the transaction that we provided in announcement and expect the deal to generate positive adjusted EBITDA in the fiscal year 2025. Fourth, we are excited about the future and are reiterating our expectation for $900 million to $1 billion of adjusted EBITDA in fiscal year 2025. Finally, we said last quarter that we would provide an update on capital allocation. We are pleased to announce that our Board authorized a share repurchase of up to $1 billion of our Class A common stock. This inaugural authorization reflects our conviction in the strong trajectory of our business and our expectation that we will generate significant free cash flow in the coming years. I'd also like to emphasize that all of us at DraftKings are very excited for the start of football season. Our product is in a great position as we are continuing to differentiate ourselves by investing in new features and functionality for Sportsbook and iGaming. In Sportsbook, we recently launched in-house player prop wagers for NFL, NBA, MLB, NHL, college football, college basketball, and tennis. We also broadened our progressive parlays to include spread and total wagers. In addition, we plan to integrate a bet and watch experience with NFL streaming. In iGaming, the DraftKings and Golden Nugget Online Gaming apps were ranked number one and number two overall in a recent third party survey. We are on track to double the number of new games we will release this year compared to last year and recently improved our interface to promote game discoverability. In closing, our business fundamentals are very healthy and we are excited about the second half of 2024 and beyond. With that, I will turn it over to Alan Ellingson.
Alan Ellingson: Thank you, Jason. I'll hit the financial highlights, including our second quarter 2024 performance and our updated 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 strong in the second quarter. We generated $1.104 billion of revenue, representing 26% year-over-year growth and $128 million of adjusted EBITDA. Importantly, customer acquisition exceeded our expectations as new to DraftKings, OSB and iGaming customers increased nearly 80% year-over-year. Customer retention and engagement were healthy and resulted in handle that exceeded our expectations. Handle was strong even with fewer than anticipated NBA playoff games. Structural Sportsbook hold percent improved year-over-year in line with our expectations to approximately 10%. Adjusted gross margin for the second quarter was 43%, primarily due to better than expected customer acquisition and the corresponding promotional reinvestment. Operating expenses, including sales and marketing, products and technology, and general and administrative expenses were consistent with our expectations as we continued to balance revenue growth with operating efficiency across the organization. Moving on to our fiscal year 2024 guidance. We now expect revenue in the range of $5.050 billion to $5.250 billion from a range of $4.800 billion to $5 billion. The updated range equates to year-over-year growth of 38% to 43%. The increase in revenue guidance is driven by strong customer acquisition, engagement and retention trends for our existing customers as well as the inclusion of Jackpocket and our recent launch of Sportsbook in Washington, DC. We are also revising our fiscal year 2024 adjusted EBITDA guidance to $340 million to $420 million from the range of $460 million to $540 million. The revision takes into account Illinois raising its Sportsbook tax rate, strong new customer acquisition expectations, as well as the prior mentioned inclusion of Jackpocket and our recent Sportsbook launch in Washington, DC. From fiscal year 2024, we now expect our adjusted gross margin to increase modestly. We expect sales and marketing expense to increase at a mid to high single digit rate year-over-year. The increase is primarily due to the investments in Jackpocket brand. We continue to expect the bridge between adjusted EBITDA and free cash flow to be approximately $100 million based on approximately $120 million of annual capital expenditure and capitalized software development costs, as well as a modest source of cash from changes in net working capital combined with interest income. And we continue to expect 2024 stock-based compensation expense to be flat to down in dollar terms on a year-over-year basis and represents approximately 7% of revenue in fiscal year 2024. Looking ahead to fiscal year 2025, we continue to expect adjusted EBITDA in the range of $900 million to $1 billion due to our underlying business momentum, including the benefit of higher customer acquisitions in the second half of 2024. We believe additional upside potential exists when we apply the gaming tax surcharge in those noted high tax states that have multiple online Sportsbook operators, which we are not including at this time. We expect to provide more details on our fiscal year 2025 guidance with our next earnings report in November. That concludes our remarks. We will now open the line for questions.
Operator: Thank you. [Operator Instructions] Our first question comes from David Katz with Jefferies. Your line is open.
David Katz: Thank you, and good morning. I appreciate all the information. What I was really hoping to do was just talk about the surcharge for a moment, which is an interesting strategy, and how you thought about the degree to which competitors may or may not follow, and how you react under those circumstances? Just flushing out the strategy a bit more would be really helpful.
Jason Robins: Thank you, David. Great question. I think every company has to do what's best for their own business. I think we believe this is what's best for us. And I would imagine that if that's our calculus, then others would come to the same conclusion. But we really don't know and we'll have to see. And, obviously, there might be other ways, too, that -- other ideas for how to implement something like this that might be better than what we came up with. We thought through this quite a bit, but you never know. So we do have some time between now and January 1st, and we'll see what happens.
David Katz: Right. Interesting. And as a quick follow up, just with respect to putting the surcharge aside, if we think about the impact that we should be reflecting in our models for Illinois, assuming no surcharge, any help, Alan, as to how we might sort of think through that impact and include it for the future, just a lot going on in there?
Jason Robins: I'll answer quickly and then Alan can add any detail. But I think the best way to think about it is the overperformance that we are seeing with customer acquisition. The launch of Washington, DC, our expectation for Jackpocket to deliver positive EBIT next -- EBITDA next year, as well as underlying trends with our existing customers and outperformance on the handle side. All should offset the Illinois tax increase next year. So even if we don't get any benefit from the fee, we will see still $900 million to $1 billion in adjusted EBITDA next year.
David Katz: Yes. Okay. Okay. Thank you very much.
Operator: One moment for our next question. Our next question comes from Shaun Kelley with BofA. Your line is open.
Shaun Kelley: Hi. Good morning, everyone. Jason or Alan, I think a lot of the rest of the subject of the sort of update here is about the increased customer acquisition environment. Obviously, some of the continued investments you're making. So the impact here seems to be -- the net is obviously higher revenue expectations and lower profit flow throughs. Specifically asking about kind of 2025 to start, just the implied -- the implied guidance right now implies some reacceleration. You haven't -- I don't think, you've given explicit revenue guidance. That seems to be kind of the undertone here. So what in your mind would kind of cause the environment to change from where we're at today? And if it doesn't, what would some of the offsets potentially be for DraftKings as we kind of move into next year? And, let's say, the customer acquisition environment remains rich and you continue to see strong adds there? Thanks.
Jason Robins: Yes. It's a great question. Just to explain a little bit about what's going on. One, even if we didn't spend another dime on marketing, new customers -- get new customer promotions. So, you're right, that has a drag on revenue and EBITDA, and we're seeing enough outperformance on the revenue side elsewhere that while it certainly hit the bottom line a little bit or will for the remainder of the year, it didn't actually. We're still seeing improved revenue. So that just kind of demonstrates, I think, the underlying strength of the business and the customers that we're seeing. So when you kind of put all that together next year, we do expect to get a little bit more revenue, because we'll need that to offset -- in order to make the math work that's needed to offset the Illinois gaming tax increase. So that's kind of how you get to the $900 million to $1 billion. And then any additional upside beyond that Illinois gaming tax amount would be either revenue driven or from the impact of the fee that we're instituting in those four states. And then as far as the potential for hot customer acquisition next year, that can always happen. Right now, we feel we've built in some degree of the increased trends we're seeing. And obviously, a lot of that will depend on if there's more state launches and things like that. So, I think, you could sort of think of this as a same state basis type of thing again. And obviously, if there's more state launches next year and more customer acquisition investment, then that might change things a bit. But that just means bigger numbers longer term over the following year. So, I think, that's the right way to think about it. But as of today, I see no reason to think that on a same state basis, we would -- we wouldn't be able to deliver $900 million to $1 billion in EBITDA -- in adjusted EBITDA next year.
Shaun Kelley: Thank you.
Operator: One moment for our next question. Our next question comes from Stephen Grambling with Morgan Stanley (NYSE:MS). Your line is open.
Stephen Grambling: Hi. Thanks. Just want to maybe follow up on Shaun's question, but ask it in a different way. Are you seeing any change in the cost to sustain and engage existing players? And also on the new customer acquisition, is that primarily coming from new states? Are you still seeing even greater uptick from existing states?
Jason Robins: So we are not seeing an increase in the existing player cost. It's all new player driven and mix driven, so meaning, mix of new players to existing. And interestingly, it really is across the board. So certainly we got some boost from North Carolina having launched in late Q1. But if you remember, last year we had two big states, Ohio and Massachusetts, launched in Q1. So this year there were less new state launches around this timeframe and none in Q2. We did have DC launch recently, but that didn't affect the Q2 numbers that was in July. So really it has to come from existing states if you look at it that way. And then it's really across products, too. We did see some particular strength in the Golden Nugget brand as we migrated onto the DraftKings platform and product. We definitely saw a boost in conversion and got some lift on there. But really it's been across states, across products.
Stephen Grambling: Thank you.
Operator: One moment for our next question. Our next question comes from Joe Greff of JPMorgan (NYSE:JPM). Your line is open.
Joe Greff: Good morning, everybody.
Jason Robins: Hi.
Joe Greff: Jason, just wanted to ask on the higher new user acquisition cost plans in the second half of this year. How much of this is offense, meaning, to grow the new user base versus defense versus impacting the competition? And then my follow-up to that is, you mentioned that presently the customer acquisition environment is healthy. What if that environment changes to the downside? How do you react? How do you pivot?
Jason Robins: Yes, great questions. I mean, we, I think, have been very consistent in that. We don't react competitively. We make decisions based on our three-year payback rule and what our data says our customer acquisition spend is returning. So as we noted, we had an over 80% increase -- an almost -- excuse me, 80% increase in new players in Q2 year-over-year and an over 40% CAC decline. I mean, those are just massive numbers, right? So when you or me looking at those numbers, your marketing team is coming to you and saying we can deliver more productive spend with the same type of results, it's hard to say no to that, right? And we've been monitoring cohort quality. I mean, everything looks really, really solid. So, I think, it's just a particularly strong environment right now. The market is growing quickly. I think, it's just really -- you've got to fish when the fish are biting, so to speak. So, I think, that's the way to think about it. It's absolutely offensive and really more so just kind of following the data. And by the same token to your second question, if it goes the other way, we'll follow it back the other way. So the good news for us is the vast majority of our marketing spend is flexible. We can move in and out of it very quickly. A lot of it's digital. Even the TV we can move out of in a matter of days, usually. So, really it's quite easy for us to make adjustments as we see what's working and at what levels. And same way that when the data is telling us we should be investing deeper, because the paybacks are really strong, if we start to see the opposite or if we start to see a decline in cohort quality, we can easily adjust there.
Joe Greff: Great. And Alan, when do you start becoming a cash taxpayer with the gaming? And what's the corporate tax -- cash corporate tax rate in 2026?
Alan Ellingson: We'll probably start paying a minimum amount of cash taxes in 2025 and 2026, but we don't expect to run through all of our NOLs until 2027 or 2028 at the soonest.
Joe Greff: Thanks, guys.
Operator: One moment for our next question. Our next question comes from Clark Lampen with BTIG. Your line is open.
Clark Lampen: Good morning, everyone. Thanks for taking the question.
Jason Robins: Good morning.
Clark Lampen: Jason, I want to come back to the sort of customer acquisition topic and the comments you made around existing state performance. I'm curious, I guess, in absence of obvious changes, I guess from last quarter to this one, from like a launch dynamic standpoint, what's creating, I guess, the sort of more favorable environment that you're leaning into. Is it sort of more of a push factor where CACs have come down enough, where it makes sense to spend more and you can actually reach customer cohorts that you weren't previously addressing, or is something sort of ticked up in terms of interest that suggests the TAM maybe really is expanding at a faster pace than we expected right now?
Jason Robins: Yes. It's a great question and hard to exactly pinpoint, but I think it's a combination of both the things that you said, primarily. So, one, as we've increased our state footprint, we've talked about this for years now, how this is kind of the gift that keeps on giving. We see the same cost from a national marketing perspective, regardless of how many states we're operating in. But the bigger your footprint, the more bang for your buck you're getting for it. So as we've grown our state footprint, you're absolutely right, it just continues to improve our efficiency, which allows us to unlock the ability to reach a little bit deeper and spend a little bit more in pockets that weren't meeting our payback thresholds previously. Secondly, I do think that there's just a ton of momentum in the industry right now. Lots of buzz coming up with NFL season. It's only going to get bigger, because this is the most busy time of year for us typically from a customer acquisition perspective, I guess the Super bowl, but the whole NFL, kind of NBA, that whole fall timeframe is usually the biggest overall period. And, really, I see no reason to think that that's going to slow down. Obviously, as noted earlier, we're going to be very closely monitoring the data and if we see any changes, we'll adjust our spend and adjust our approach. But right now, I think, if anything, you'd expect it to build, because we're in really the least busy time of year and we're still seeing very strong customer acquisition. So, I don't know why that would slow down going into the busiest time of year.
Clark Lampen: Understood. I have a follow up also for Alan, I guess, on the repurchase that was announced today. Alan, you guys just wrote a fairly large check for Jackpocket. There have been some rumors of other sort of smaller scale deals. Football season last year was a pretty good reminder of result swings and the potential for sort of intra-quarter outflows. Is it fair to think that, I guess, utilization of that buyback authorization might be more of a 2025 event? And if so, is this something that's going to be more formulaic in nature or would you hope to be a little bit more tactical and take advantage of the bigger dislocations, I guess, in the stock price? Thank you.
Alan Ellingson: I think we anticipate being able to buyback the $1 billion of Class A shares over the next two to three years. And we would like to be -- ideally be formulaic with it create some consistency. But I do expect it to take more than just the next little while to get fully finalized.
Jason Robins: Yes. And it will be a mix. I mean, we'll have certainly some flexibility, as you noted, to take advantage of any dislocations in the share price. But as Alan noted, I think the bulk of it will be formulaic.
Clark Lampen: Thank you.
Operator: One moment for our next question. Our next question comes from Robert Fishman with MoffettNathanson. Your line is open.
Robert Fishman: Hi. Good morning. Curious, are you guys seeing any signs of consumer weakness in your -- some of your older states, maybe? And how would you think about the impact on OSB and iGaming if we see any more of macro headwinds in the next couple of quarters? And then shifting gears a little bit, given the expected integration of the bet-and-watch experience with the NFL streaming, curious did you see anything last year? Some of your competitors did, I think, have this functionality. So anything that you learned last year about the NFL season that pushed you into this product enhancement? And any early thoughts about exploring these rights for the NBA? Thank you.
Jason Robins: Yes. I think, on your first question, we're seeing absolutely no signs of any weakness in the consumer whatsoever. Hard to know how much of that is unique to our industry versus macro, but really on our end, we're seeing super strong, healthy cohort behavior across the board. And as noted, customer acquisition is really at an all-time high as well. So everything looks really good on that front for us. On the bet-and-watch side, it wasn't really that we saw anything last year and anything our competitors did. It was more that we wanted to do this all along. It's a great thing that we think will add a lot of value to our customers doing live betting, just didn't make the cut. We had so many other great things that we were trying to get done last year. And, I think, to do it in a sort of haphazard way wasn't our style. We want to do it right, so we really wanted to make sure it wasn't just some kind of hack together integration of a video feed. But it was a true experience that we are creating, because if somebody tries it, we want them to say, this is great, and come back and get one shot at a first impression. So, I think, we felt like between the other things that we had on our roadmap and our desire to make sure we did this in the right way, we decided it would be better off for this coming season.
Operator: Thank you. One moment for our next set of question. Our next question comes from Ben Miller with Goldman Sachs (NYSE:GS). Your line is open.
Ben Miller: Thanks for taking the questions. I guess just back on the gaming tax surcharge, can you just talk about the thought process behind using a surcharge as the mitigation measure as opposed to a more discreet lever? And then are there any insights you can share around customer behavior from any A/B Testing that you might have done in advance of announcing this? Thanks.
Jason Robins: Sure. So definitely discussed and thought through a lot of different ways of doing it. And as I said, some better idea comes along. We're open to it. I think the important thing is that, if you look at sort of the way it's typically done in other industries, whether it'd be hotel taxes or even the sales tax that you pay when you buy something at the store, taxis, you name it. It's typically line itemed out separately and usually 100% passed along to the consumer. In this case, we're obviously subsidizing a chunk of it. So, we just thought that was most sort of in line with how it's typically done versus trying to obfuscate it, which also isn't consistent with our commitment to be transparent to our customers and be very customer friendly in everything we do. So, I know there's maybe benefit to hiding it, because maybe people don't notice, but I think over the long term customers appreciate transparency and even if they don't love that, their state implemented a high tax and some of that is being passed along. I think they prefer that to not knowing if it were buried in the pricing or something else.
Ben Miller: Was there any A/B testing that you guys done that you could share any customer behavior from that?
Jason Robins: No, we haven't. We actually -- still there's work to do to implement it and I think it's hard to A/B test something like that. What we are doing is we're launching in four states, so we'll certainly see the impact there. And, obviously, it won't be a perfect A/B test, but I think that we have enough comparable data from other states and enough of an understanding of what we would expect from consumer behavior that, I think, will have a pretty clean read on the impact. But it is a nominal amount. If you look at the materials we provided in the investor presentation, for Illinois, for example, if you made $10 bet to win $20, it would be a 37-ish -- 30 something cent. I forget the exact number charged. So, obviously, some people might just react negatively to the idea of being charged at all. But it's really fairly nominal and it makes a huge difference in our ability to make a reasonable margin and also more importantly to compete with the illegal market, which pays no taxes and has the ability to invest 100% of their revenue into product and other things. So for us to be able to be competitive with the illegal market and invest properly in product and customer experience in a state that has a very high tax rate, we feel this is an important step that consumers will ultimately understand. And if they feel the product and experience is better, then they'd rather pay for that than somewhere else that maybe doesn't have as stronger product.
Ben Miller: Great. Thanks so much.
Operator: One moment for our next question. Our next question comes from Robin Farley with UBS. Your line is open.
Robin Farley: Thanks. Yes. I wanted to ask, when you think about strategy in Latin America, is that something you would pursue sort of organically or something that you might look to use M&A to get a stake in that market? And then just a quick follow-up question on the earlier commentary about the increased acquisition -- customer acquisition. Your market share looked pretty consistent year-over-year. I guess, how should we think about what's the time lag between the higher customer acquisition and that showing up in the market share numbers? Thank you.
Jason Robins: So, a couple things. One, answering your question on Latin America, we would probably not do it organically if we were to pursue, it would be through M&A. That said, we don't currently have any plans to do that either. I think, we're really focused, as we've noted in the past, on winning the US online gaming opportunity. In fact, just in the last couple of months, we divested VSiN, we shuttered Reignmakers. So, I mean, we're more focused than ever on our core. And I think that's just been a mantra and a theme throughout the company is focus, focus, focus. So definitely want to make that point. But were we to do something, I think it would likely be through M&A for that very reason we don't want to take a big chunk of our brain trust here and distract them with something like that. And then, I'm sorry -- oh, second question on share. So hard to know exactly, because I would assume that if we're seeing robust customer acquisition, then our competitors are as well. So, I don't know if that's unique to us. If it were unique to us, it should show up pretty quickly within a quarter or two of acquiring the customers. But I think the caveat is, my guess is that the entire market, the entire industry is experiencing very strong customer acquisition right now, because -- well, I guess there could be some things, like in the case of the Golden Nugget migration, that we're getting a little bit of an extra boost from, but for the most part we're seeing it across states, across products. So, I think, it's more of a macro industry trend as much as anything else.
Robin Farley: Okay, great. Thank you very much.
Operator: One moment for our next question. Our next question comes from Dan Politzer with Wells Fargo (NYSE:WFC). Your line is open.
Dan Politzer: Hey, good morning, everyone. First one, in terms of that stronger customer acquisition retention engagement, if I just look at your slide deck, it's a positive revenue of about $177 million, but a drag in terms of EBITDA. But that compares with your first quarter, where it was -- both of those figures were positive, right? They would add incremental adjusted EBITDA. So, I guess, the question is, is there any way to kind of break out this -- the $23 million EBITDA loss as part of your bridge as it relates to better monetization of existing customers versus maybe the drag of acquiring new customers?
Jason Robins: Yes. It's a great question. I mean, I think that the best way to think about it is if you assume that the incremental revenue from existing customers flows through somewhere in the 50-ish percent range, maybe a little bit higher, but somewhere around there, then you can kind of back into what comes from each.
Dan Politzer: Got it. And then --
Jason Robins: And the other thing I note, too, and I just want to make sure people understand this as well, because I think it's an important point. When we talk about revising EBITDA guidance and incremental customer acquisition cost, even if we didn't spend any more money on marketing, new customer promos come from just more customers coming in. So if we under forecast it, which in this case we did, the number of new customers that we expect to acquire this year, then even if we spent zero more dollars on advertising, on marketing, we would still see a headwind, which is in that line you're mentioning from new customer promos, because just more people signing up means more new customer promos. So, that's a good thing. It's not a bad thing. Obviously, it creates more profit over the long term, but it's something that really is not within our control. And, I think, a good long term element of what we believe is a large and growing TAM. But in the end, unless we took away new customer offers, which we would never do, that's something that we can't really control.
Dan Politzer: Got it. And then just quickly for my follow up on the surcharge. In those states that you're going to implement that, are there additional steps that you're going to implement as well, such as marketing reductions or any other levers you can pull in Illinois, New York, Pennsylvania, to maybe offset some of the higher taxes?
Jason Robins: Yes. I think part of the idea is to do this in place of that, so we can continue to invest in the state. I think, New York is a great example where everyone -- all companies have, including DraftKings, have pulled back heavily on promotions and in state marketing investment. And, I think, that's fine, that's one way of doing it. But another way is to say, look, I'm going to adjust so that we're effectively at a 20% tax rate, which is in line with a lot of other states, and I'm going to invest at the level that I would invest in a 20% tax rate state. We'll have to see which one works better, but my guess is that that's going to work better, because it allows us to make the investments in product and promotions and marketing and all the other things that should continue to create long term growth.
Dan Politzer: Thanks so much for all the detail.
Operator: One moment for our next question. Our next question comes from Joe Stauff with SIG. Your line is open.
Joe Stauff: Okay. Thanks. Good morning, Jason and Alan. Two questions, please.
Jason Robins: Good morning.
Joe Stauff: I wanted to see if you could, Jason, sort of describe, say, the iCasino first opportunity. At this point, you have GNOG fully ramped up and launched, and in particular, was it a material contributor to your MUP growth? And then the second piece is just wanted to ask about, say, the economics of customer acquisition in existing states. We're aware obviously of that initial golden cohort, but just wondering how and what you've seen in terms of the economics and the LTVs for all the cohorts after that, whether it'd be year two versus year three and so forth? I guess the main question is, like, in year two and year three, based on what you can observe, are the economics very different between them? One would think over time it'd be lower, but I was just wondering what you're observing.
Jason Robins: Yes. It's great question. So starting off, as we noted, we're seeing customer acquisition outperform really across the board, really states and products alike. That said, GNOG has been a bright spot ever since we migrated onto the DraftKings products and platform, which is a much more positive customer experience, better conversion flows, all those sorts of things. We have definitely seen GNOG spike. So that was a material contributor for sure. It's still relatively small compared to DraftKings, but we're very excited about the potential for that brand in growth that we're going to see there. So more to come there, but definitely an important contributor to the outperformance on customer acquisition. And then the cohort question, we've noted this in the past as well, for sure. As time goes on, you see some decline in cohort quality. It's a thing that we look at every single day, and it's not just a matter of time. Obviously, time is one factor, but you also see different LTVs based on what sport you acquire a player on or whether a player gets acquired onto iGaming versus onto OSB. First, there's a number of different factors that we have noted that definitely drive differential LTVs. Obviously, the state that they're acquired and play in based on tax rates and other elements like whether there's iGaming. So, lots of complex variables that go into how we look at LTV, but certainly one of them is that there is an underlying quality of the player that declines as time goes on. Because of course you're going to get your strongest players in the first year or two of state launch. So that is something that we factor in. We closely monitor it. It tends to asymptote out after a little bit of time. So it's not like it just perpetually declines. Usually you kind of get that first year or two, depending on the state where you get the strongest players, and then it kind of flattens out. But no doubt, players you're getting a few years in or weaker than the players you get day one.
Joe Stauff: Thank you.
Operator: One moment for our next question. Our next question comes from Carlo Santarelli with DB. Your line is open.
Carlo Santarelli: Hey, everybody. Good morning.
Jason Robins: Good morning.
Carlo Santarelli: First off, I just wanted to clarify something as it pertains to the 80%, the 80% growth in customers. Does that include the draft -- the Jackpocket customer base?
Jason Robins: No, that's just new customers onto the DraftKings brand. Oh, and GNOG as well.
Carlo Santarelli: In GNOG and DraftKings, okay, that's helpful. And then secondly, just to follow up, Jason, on your response to, I believe it was Dan's question, around the $177 million [Technical Difficulty] I know you said 50% flow through on the existing customers. Is it fair to more or less estimate that the existing customers are likely generating, call it, more than $177 million of incremental net revenue as the new customers would carry kind of negative net revenue through the rest of this year through the payback period. And hence the math is kind of like 200 to 300 from new customers, and then looked at the other way, take 50% flow through for the EBITDA and look at what the delta is on the acquired customers. Is that accurate?
Jason Robins: That's close. So new customers that we acquired, say, in Q2 will definitely generate positive revenue by the end of the year, but their new customer promo will also be a significant chunk of the play. What is it about three or four months after a customer's acquired that they -- so depending on the timing, many of them would be negative this year, but some would get positive. So it's a little bit complicated to think about. But the best way that I would think about it is separate out. Instead of thinking of it as a customer level, think of it as we're spending X more promo dollars because of new customers. And those promo dollars are going to flow through somewhere around 90% to the bottom line. And that's how you can back -- and then the rest of the revenue, the positive revenue, flows through in the 50s and that's how you can back into it.
Carlo Santarelli: Got it. Okay. That makes sense. Thank you.
Operator: One moment for our next question. Our next question comes from Bernie McTernan with Needham & Company. Your line is open.
Bernie McTernan: Great. Good morning. Thanks for taking the questions. Maybe just to start sticking on the EBITDA bridge for 2025 or moving over to 2025, how much of the stronger customer acquisition, retention engagement, that line that's offsetting the Illinois, how much of that is really truly existing customers versus customers that you've acquired this year?
Jason Robins: Sorry, say it one more time.
Bernie McTernan: Yes. In the EBITDA bridge, so Illinois is a big negative and then the big offset is the customer retention engagement line. So want to know how much of that is driven by truly existing customers that you acquired before this year and better outperformance there versus the customers that you have been and expect to acquire this year?
Jason Robins: This is 2025, right, you are talking about?
Bernie McTernan: Yes, for the 2025. Exactly.
Jason Robins: Okay. I don't know proportionally how it breaks out. Do you know the answer to that?
Alan Ellingson: We won't break it out for this call, but disproportionate amount of it is the existing customers. New customers tend to ramp up over time. So you can assume that it's a little bit heavier on the existing customers and the performance on the retention and the engagement of our existing customers and less on the new customers, which we're still exploring the value of.
Bernie McTernan: Okay, perfect. And then just given the focus on higher tax rate states, is the contribution profit margin significantly different in those high tax rate states versus the lower ones?
Jason Robins: Well, pre-instituting the fee, definitely the contribution margin is different, because even with reduced promo and marketing, you still can't like -- I mean, it depends on the state, right. I guess, New York is probably the one I'm thinking of when I'm answering your question. 51% tax on gross revenue is just -- you can't overcome it to a point where it's going to be in line with the other states margin wise. But obviously it depends on the state. And some states that are closer to that 20%, we can claw back most of it through promo and reduce advertising.
Bernie McTernan: Okay. Thanks, Jason. Thanks, Alan.
Operator: One moment for our next question. Our next question comes from Jed Kelly with Oppenheimer. Your line is open.
Jed Kelly: Hey, great. Thanks for taking my question. Just circling back on the surcharge, maybe a different way to ask it, what would cause you not to potentially implement it? And then just real quickly on hold. Some of the hold trends are obviously different, but have you seen any change in how you view your structural hold or your parlay mix? Or are you changing, like, hey, it's more important to drive engagement than to maximize hold. Thanks.
Jason Robins: Yes. Great question. So, as of now, I don't think there would be any reason that we wouldn't implement it, but obviously we're paying close attention to customer feedback. And if we hear anything that makes us change our mind, we'll certainly let you know. I think on the hold side, we continue to focus very much there. I think it's largely still a bet mix thing. Certainly, we feel like there's a ton of room to increase our parlay mix and increase our average leg count still. So team is very focused on that. I think, we're also focusing on other parts of the betting platform as well, such as live betting. So it's a little bit more balanced probably than, I think, maybe last year where it was just all about hold rate and bet mix, but we're still very focused on bet mix.
Jed Kelly: And then just real quick, anything to call out on shutting down Reignmakers in terms of our EBITDA drag or headwind fix?
Jason Robins: Yes. Reignmakers is fairly immaterial, so I wouldn't factor it in in any way. I think, for us, it's really just about eliminating a distraction and potential risk. And as I said earlier, I think the mantra around the company has been focus, focus, focus, let's go win the US online gaming opportunity and maximize the amount of profit we're driving in that space. And I think that's what we're focusing on right now.
Jed Kelly: Thank you.
Operator: [Operator Instructions] One moment for our next question. Our next question comes from Barry Jonas with Truist Securities. Your line is open.
Barry Jonas: Hey, guys. We've seen a number of states starting to react to the offshore market by banning [indiscernible]. Do you see these actions as meaningful to combat the illegal market?
Jason Robins: I think so. I mean, right now, the illegal market, particularly in the iGaming space, ironically, is bigger than ever. I think consumers don't know oftentimes what's legal and what's not. They don't know if it's legal in their state, and there's just zero controls put on these companies that make sure that they're not marketing to miners and other sorts of things. So I do think it's a big issue, and it's good to see the regulators starting to focus on it. And the thing is that there's so much pent up demand and there's so many people that would prefer to bet in the legal market. I think you're seeing growth despite the fact that there's still a rampant illegal market. But for sure, a lot of the current TAM is still tied up there, both for the long term health of the industry as well as for making sure that states are maximizing their revenues and their purpose for doing this, which is to regulate and protect consumers, I think it's absolutely essential that that continues to be a focus. So I'm happy to see it, and hopefully we'll see more of it.
Barry Jonas: Great. Thank you.
Operator: One moment for our next question. Our next question comes from Ben Chaiken with Mizuho. Your line is open.
Ben Chaiken: Hey, thanks for taking the question. Two very quick product questions. I guess, on integrating -- I would imagine integrating Jackpocket into the DraftKings app would be another significant customer acquisition opportunity, I guess. One, do you agree? And two, if so, any color on timing? And then on the bet-and-watch integration, will that require users to have access to the games themselves, or will you have an opportunity to kind of tactically subsidize that in any way? Thanks.
Jason Robins: I think the bet-and-watch is just included, so is that correct? It's not. Yeah, there's no additional charge for it. So it's a feature that customers will have just by being a part of the DraftKings user base. And then -- sorry, what was the first question?
Alan Ellingson: Jackpocket.
Jason Robins: Oh, Jackpocket. Yes. So, we do plan on integrating those products into DraftKings, as well as integrating DraftKings Casino and OSB products into Jackpocket. Timing, we haven't quite determined yet. I think, in the past, what we said, and I kind of echo is, we long term want to have all of our products available through all of our brands, and exactly when we implement those things directly versus when we have more linkage through brand-to-brand cross-sell will depend on other priorities and how that slots into our product roadmap. But we definitely do plan to do that at some point.
Ben Chaiken: I guess just as a very quick follow up, would you agree that integrating it would be a significant kind of customer acquisition catalyst for other portions of the business, or do you think you've already acquired those customers? Does that makes sense.
Jason Robins: No, we definitely haven't acquired all those customers. So I agree it would be, and that's the reason we're planning to do it. I also think that in the interim, we continue to see Jackpocket as a great vehicle for acquiring those customers and cross-selling them into DraftKings. But we know from experience that having a fully integrated product is always going to yield stronger conversion and stronger cross-sell. So no doubt you're correct that that will be a boost.
Ben Chaiken: Thanks.
Operator: One moment for our next question. Our next question comes from Brandt Montour with Barclays (LON:BARC). Your line is open.
Brandt Montour: Hi. Good morning, everybody. Thanks for taking my question. So, one more on the surcharge. Just thinking through the potential outcomes of that plan, especially if nobody follows suit, we would think that -- we would think that it would affect the larger players, the VIPs more, and at the same time, you're accelerating your customer acquisition and penetrating more customers in your existing states. Is there a thought that this would potentially move you more to a recreational mix and could that actually help hold longer term?
Jason Robins: Yes. It's a great question. Certainly, I think that players betting multi-leg parlays and things like that are going to be less sensitive, because the payout is already very large. So, I get that. I hadn't really thought about how it might affect -- I mean, we're hopeful that our product and the investment we're making, our customer experience is strong enough that we have players across the spectrum and they view us as being worth maybe paying a few extra cents on a bet. But certainly we'll have to see how that plays out and it'll be something just like everything, where we look at the data and we decide what we do accordingly. I do think that if you run the math, it would take quite a bit of top line deterioration to make it not worthwhile from a bottom line perspective. So, I'm optimistic. But we'll have to see and we'll have to follow whatever the data and analytics tell us to do.
Brandt Montour: Oh, great. Thanks for that, Jason. And then just to follow up on Jackpocket, just piecing together some of your comments, you're investing more in marketing. This year in Jackpocket, the integration sounds like a little bit more longer term. So what gives you confidence that you're going to inflect positive in your 2025 guide in your -- in that you laid out in your deck? Just trying to understand some of the drivers there.
Jason Robins: Well, really it's the revenue growth we're seeing right now on Jackpocket that gives us confidence we'll be able to achieve adjusted positive EBITDA in 2025. So they've been really doing well from that standpoint. Also, as a reminder, they have an extremely low CAC. So while we are investing more in, we get a lot of customers for that. So, definitely makes a big difference in their revenue ramp as well. So, I think, all signs point towards them being a positive contributor to adjusted EBITDA in 2025 and beyond. But obviously, we'll have to see how the back half of the year plays out and we'll have more of an update on that in November.
Brandt Montour: Great. Thanks, everyone.
Operator: One moment for our next question. Our next question comes from Jordan Bender with Citizens JMP. Your line is open.
Jordan Bender: Hey, it's Jordan. Thanks for taking my questions. I want to talk on your market access agreements. There's obviously not much room to move in some states, like in New York and Oregon, but is the supply/demand dynamic changed to the point that states with unused skins can maybe act as a renegotiation tool and be a serious lever to drive cost savings over the long term? Thank you.
Jason Robins: I think, there's probably some room there. Most states we feel we have pretty good deals in already, so I don't think there's a ton where we feel there's a lot of optimization, but I think there's probably some optimization and it'll be a little bit longer term, because most of the deals we struck are very long term deals. So, like seven to 10-year deals. But I do think as they start to come up, there will be states that have a lot of open skins. And just like anything, it's a supply/demand thing. And I think also, even though we got great rates, many of the early states were before, I think, we really established the level of place in the industry that we have. So, I think, that will hopefully help a little bit, too.
Jordan Bender: Thank you very much.
Operator: One moment for our next question. Our next question comes from Ryan Sigdhal with Craig-Hallum Capital Group. Your line is open.
Ryan Sigdhal: Hey, good morning, guys.
Jason Robins: Good morning.
Ryan Sigdhal: Looking at Slide 10, the MUP increase sequentially, normally kind of flattish quarter given seasonality, up almost 1 million. Are you able to break out how much that was Jackpocket versus just organic DraftKings and Golden Nugget acquisition?
Jason Robins: It was mostly Jackpocket. Obviously, the new customer acquisition boosted it too, but given the substantial size of their database, it was mostly Jackpocket. No?
Alan Ellingson: No.
Jason Robins: Oh, I'm sorry. It was not. I got that wrong. Half and half. Okay, I stand corrected. Thankfully, I have people with better data than I have in my brain, apparently next to me, so it's about half and half.
Ryan Sigdhal: Thank you. Good luck, guys.
Operator: One moment for our next question. Our next question comes from Michael Graham with Canaccord. Your line is open.
Michael Graham: Thank you. Jason, I just wanted to ask about your thoughts on the product and the platform as we head into the NFL season. Obviously, you don't have the tremendous, like, upside from introducing same game parlays that you had, but you have the bet-and-watch feature. But just wanted to, kind of, hear any comments you're willing to share on how you think the product will perform in this important seasonal period here coming up?
Jason Robins: I think I feel really excited about the product we have going into NFL. A lot of the work we've been doing over the last several months has been more back end performance stuff. So things that maybe aren't as immediately obvious, because they don't show up like front end features, but things like making sure that pages load faster, making sure that the app crashes less, making sure markets are up for longer, and we have less time where marketing markets are locked or unavailable, adding new bet types, bringing in-house our pricing and trading for many new sports, and also launching things like cash out for same game parlay. So we have a lot of really exciting new stuff. We expanded progressive parlays to include new types of bets as well. So -- and more to come. Obviously, bet-and-watch hasn't launched yet and we have a number of other features that we haven't announced that we have planned for the coming months. A lot of what we do, really all of what we do, revolves around a calendar starting in the fall. So the team thinks about it as what do we want to ship in the August-September timeframe and how do we then, starting at the beginning of the year, orient our entire product road map and calendar around that. So a lot of the product that we ship is going to be done over the next three to six weeks, and I think you'll see a lot of new stuff pop up as the season approaches.
Michael Graham: All right. That's exciting. Thank you.
Operator: One moment for our next question. Our next question comes from Chad Beynon with Macquarie. Your line is open.
Chad Beynon: Good morning. Thanks for taking my question. Jason, I wanted to ask about, I guess, the temperature of some of the tribal news that's been out there. Obviously a big decision that we learned a few months ago in Florida. Does this change the landscape of other tribal states in terms of what you believe they could offer and then, more importantly, your ability to partner with these companies? Could that accelerate some of the TAM if they decide to move forward on digital? Thanks.
Jason Robins: Yes. I do think that there is some momentum in tribal communities now. And, obviously, DraftKings already has a number of partners that are tribes in various states, including Foxwoods, the Pequot Tribe in Connecticut, Passamaquoddy in Maine, Bay Mills in Michigan, several others. I don't want to leave any out, but I probably left a few out. But we continue to believe that we are the partner of choice and also that we have a great track record, if you talk to any of our tribal partners, of being great partners. And, I think, just like anything, it takes time and education sometimes in some states, like California, where there's over 70 tribes. I think that there it's obviously about getting alignment as much as it is about openness. And so each one, each state is a bit unique, just like all states in all regards politically and otherwise are unique in their own ways. So we kind of have to look at it that way. But I do think there's some momentum now more than ever. I think you're seeing -- we're seeing tribes come to us and ask about what we can do. Minnesota is one that I think is another tribal state that got very close to passing a bill this past session. And I'm hopeful that it gets done next session. And that was all about the tribes and the tracks agreeing to a deal. So, sometimes it's not even about openness, it's about getting different stakeholders within the state to align.
Chad Beynon: Thank you. Appreciate it.
Operator: One moment for our next question. Our next question comes from Jeff Stantial with Stifel. Your line is open.
Jeff Stantial: Great, thanks. Good morning, guys. Thanks for taking our question. Maybe digging in a bit further into some of the commentary on iCasino player acquisition. Jason, you talked about some sequential uplift to conversion rates from the Golden Nugget platform transition, but looking at this more strategically, I guess, has your philosophy on investing towards that iCasino led player cohort changed at all now that Golden Nugget is fully integrated. Historically, I believe the strategy is more to focus on cross-sell of sports users versus acquiring that higher CAC, higher LTV, iCasino led player. But just curious if you're thinking here shifted around at all based on the returns that you're seeing with this recent user acquisition upsell [ph]? Thanks.
Jason Robins: Yes. I think so. I mean, I wouldn't really describe it as a philosophical change as much as us continuing with the philosophy of following the data and the analytics and putting our dollars where we feel that where we see the best returns. So naturally, as you noted, when you see an increase in performance on GNOG, then that would mean that more dollars should flow there, because it's performing better, therefore should get a higher proportion of our acquisition spend. So we definitely are moving dollars around based on performance and what we're seeing, and that's always been consistent with what we've done. But the result, as you noted, has been some shift towards that iGaming-first customer acquisition investment, which I think, again, it's all just kind of where do we get the best return, right. It's not that we think cross-sell is inherently a better way of doing it. It was just -- and still is, by the way, that that's where we get the bulk of our iGaming customers, and that's the most efficient means of doing it. But certainly where we see opportunity to invest directly in acquiring an iGaming-first customer, we're also taking advantage of that.
Jeff Stantial: Great. Thanks very much.
Operator: One moment for our next question. Our next question comes from Lance Vitanza with TD (TSX:TD) Cowen. Your line is open.
Lance Vitanza: Thanks, guys. First of all, congratulations on a great quarter.
Jason Robins: Thank you.
Lance Vitanza: I just have one question regarding the surcharge, but it does have three parts. And maybe just to focus on Illinois, can you talk about what percentage of the EBITDA lost due to the tax rate increase? Is the surcharge designed to recapture? I'm just trying to get a sense for the potential upside beyond the $900 million to $1 billion guide to the extent that the surcharge is successful. Obviously, I'm talking about fiscal 2025.
Jason Robins: Yes. So the way we calculated it is, we set the amount such that we are targeting DraftKings covering 20% of gross revenue and taxes. And so basically, the way to think of it is, any tax rate that's higher than 20%, we would be paying up to the 20%, and then the remaining would be -- the fee is designed to offset. So in a state like New York, where the tax rate is 51%, that's a large number. Obviously, the big question is, do we see any deterioration in handle and top line as a result? But you can do the math and see it would take quite a bit, because if you think about 51% versus 20%, that's 60% of the taxes that we're paying in New York. And you could do the math on that from all the public reports. It's a big number. So, you need to see a substantial decline in handle to get to a point where you were fully cannibalizing that. And obviously, if we saw that, we would reconsider our plan. But I think there's quite a bit of cushion there.
Lance Vitanza: Well, and my gut tells me that customer activity would actually be highly inelastic, at least around mid-single digit surcharge on winnings. But -- and, I know, you haven't done A/B Testing, but do you have any data that you've seen that would bear this out? I mean, other than just our guts?
Jason Robins: Yes. I think you're right, by the way. The best data we have is really from either other industries or from our industry and other parts of the world. There are other places where online gaming companies charge customers more because of the tax regime. In countries like Germany or Australia, as an example. It's not done exactly in this way, but it's conceptually very similar. Also, we noted this earlier on the call, but a number of industries, from hotels to taxis, all have taxes in various states that get charged to the customer. And people may gripe about it, but I don't really see behavior change because of it. So, you're right. It depends on the level, I think, in the mid-single digits. Our belief is that when you compare it to sort of other industries as well as, sort of, what we just got checked think seems fair and seems reasonable to a customer. It seems like this is a good zone for us, but we'll only find out when we do it. It's hard. You can't really A/B Test something like that.
Lance Vitanza: Right. And last part of my question. I'm glad that you're making the surcharge visible to consumers. As you point out, black market operators pay zero tax, a 40% tax, and obviously referring to Illinois here, that seems short-sighted, unfair and ultimately counterproductive. And I'm wondering if part of the calculus in making the visible, making the surcharge visible, is that intended to raise awareness around this issue? Do you think you could possibly generate grassroots support for more rational tax policy, i.e., lower rates?
Jason Robins: Well, there's certainly an element there that entered into our thinking. Obviously, you're right. When you have illegal operators paying zero tax, that's pretty tough to compete with at any level. But when it starts getting higher than 20%, it just becomes untenable. So I do think that in absence of us doing something like this, why wouldn't more states consider it? It's not getting passed to their customers, they're not hearing from their constituents, and we haven't, in New York, done anything differently, or nobody in the industry has. So I do think that this is something that may make some states reconsider, because now they may be hearing more from their citizens that they don't like it. Obviously, they wouldn't be hearing anything from people who are being charged, because it's not like -- I guess maybe they'd hear from like local teams that aren't getting as much sponsorship spend, but not from the mass of voters that bet on sports. So -- but in the end, I think states are going to decide based on a number of items. I mean, if you look at some of the comparison industries I mentioned, like taxis and hotels, it's not like you don't pay for that when you go to a New York. So, I think, some states feel like because of where they are and because of the value proposition they bring that they can have higher costs in certain things and that's not up to us. That's a policy decision that they're going to have to make. And, as a business, we have to make the business decision that we have to make accordingly. But certainly we will continue to advocate for taxes that allow us to compete more with the illegal market. And I am hopeful and I believe most states do see that. If you look, most -- vast majority of states around the country have tax rates of 20% or under, it's just a handful that don't.
Lance Vitanza: Thanks, guys.
Operator: Ladies and gentlemen, this concludes the Q&A portion of today's conference. I'd like to turn the call back over to Jason Robins for any closing remarks.
Jason Robins: Well, thank you all for joining us on today's call. We are really optimistic about the second half of 2024 and are excited and well positioned position for success in the future 2025 and beyond. Thank you for your continued support.
Operator: Ladies and gentlemen, that concludes today's presentation. You may now disconnect, and have a wonderful day.
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