DraftKings(DKNG)2024-11-08 16:41Financial Data and Key Metrics Changes - Revenue grew 39% year-over-year to 59 million [12][13] - Adjusted gross margin improved by 300 basis points year-over-year to 40% [14] - Customer acquisition cost (CAC) improved nearly 20% year-over-year [13] Business Line Data and Key Metrics Changes - Online sportsbook gross gaming revenue increased by 39% year-over-year [12][13] - iGaming gross gaming revenue grew by 26% compared to the third quarter of 2023 [12][13] - Newly acquired online sportsbook and iGaming customers increased by 14% year-over-year [13] Market Data and Key Metrics Changes - Structural sportsbook hold percentage increased year-over-year, with expectations of 11% for fiscal year 2025 [18][54] - Promotional reinvestment rates improved by 300 basis points year-over-year [14] Company Strategy and Development Direction - The company is focused on improving its sportsbook product and expanding into new markets, including Missouri, which recently legalized online sports betting [10][11] - Fiscal year 2025 adjusted EBITDA guidance is reiterated at 1 billion, with a new revenue guidance range of 6.6 billion, indicating a year-over-year growth of 27% to 35% [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a customer-friendly stretch of NFL outcomes impacting short-term revenue and adjusted EBITDA but remains optimistic about the overall business trajectory [7][11] - The company is cautious about customer acquisition promotions, aiming to balance growth and profitability [16][19] Other Important Information - The company plans to generate approximately $850 million in free cash flow for fiscal year 2025 [18][94] - Management is exploring opportunities in non-sports betting prediction markets, particularly around election markets [50] Q&A Session Summary Question: Flow-through assumptions for next year - Management believes a long-term flow-through rate of 50% is appropriate, but for next year, it is expected to be around 39% due to strong customer acquisition [20][21] Question: Mitigating factors for revenue impacts - Management noted that volatility in sports outcomes can affect short-term results, but over longer periods, performance normalizes [24][26] Question: Illinois promotional activity adjustments - Management is still refining promotional strategies to offset higher taxes in Illinois, indicating that full realization of these strategies is still in progress [31][32] Question: Revenue guidance breakdown - Management indicated that the 31% revenue growth guidance is based on market growth, market share stability, and promotional extraction [34][36] Question: Customer acquisition and retention levels - Management stated that retention levels between OSB and iGaming customers are similar, with OSB showing slightly better retention [70][71] Question: Future state opportunities for OSB and iGaming - Management is eyeing states like Texas, Georgia, and Minnesota for potential OSB expansion, while New York and Illinois are key targets for iGaming [88][89] Question: Free cash flow usage and buybacks - Management plans to be more active with share repurchases as free cash flow scales, while the impact of sports outcomes on hold is a mix of team outcomes and player props [94]