DraftKings Inc.

Today, ladies and gentlemen, thank you for standing by. Welcome to the DraftKings first quarter 2020 earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference call is being recorded today, May 15, 2020. At this time, I'd like to turn it over to DraftKings chief legal officer, Stanton Dodge.

Good morning, everyone. and thanks for joining us. Statements we make during this call that are not statements of historical fact constitute forward-looking statements that are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results and or from our forecast. We assume no responsibility for updating forward-looking statements. For more information, please refer to the risks, uncertainties and other factors discussed in our SEC filings. During the call, management will also discuss certain non-GAAP and non-IFRS measures, which we believe can be useful in evaluating DraftKings and SB Tech's operating performance. These measures should not be considered in isolation or as a substitute for DraftKings financial results prepared in accordance with GAAP or SB Tech's financial results prepared in accordance with IFRS. A reconciliation of these measures to the most directly comparable GAAP or IFRS measures is available in our current report on Form 8-K-A, filed today with the SEC, and in our earnings presentation, available on our website at investors.draftkings.com. Hosting the call today, we have Jason Robins, Chief Executive Officer, and Jason Park, Chief Financial Officer at DraftKings. They will provide opening remarks and review of financials, and then we will open up the call to questions. I will now turn the call over to DraftKings CEO, Jason Robins.

Thank you, Stanton, and good morning, everyone. Welcome to our first earnings call as a publicly traded company. Before we start, I'd like to thank all the essential workers, from healthcare professionals to grocery store employees, who have been on the front lines fighting this global pandemic. Our thoughts are with everyone who has been impacted by COVID-19. I'd also like to express my appreciation to our shareholders for their support. We are thankful for the belief that our investors have demonstrated in DraftKings through their participation in our business combination, and we also greatly value and welcome those who have become new DraftKings shareholders. The success of our transaction is a testament to the conviction and confidence our owners have in our ability to continue to build the only U.S.-based pure play sports betting and iGaming company. The DraftKings vision is unchanged. Our goal is to build the best, most trusted, and most customer-centric destination for skin-in-the-game fans, Offering the most entertaining real money gaming products that will forever transform the way people experience sports. I'd like to cover three main topics today. First, I will provide a brief summary of the business, the large and growing market opportunity, our strong competitive positioning, and our ability to generate differentiated economics. Second, I'll review how we are managing through the current crisis to best position our business as sporting events resume. And I will also provide an update on where things stand on the legislative front. Third, I'll outline our major priorities going forward. With that, let me start with a summary of our business. StratKings is uniquely positioned at the intersection of digital sports entertainment and gaming in a rapidly growing industry. This opportunity represents an estimated addressable market of over $30 billion in the U.S. alone when considering a combination of online sports betting, fantasy sports, and iGames. There may also be less developed fantasy and betting markets that could grow significantly in the coming years, such as esports. We believe the combination of a large, currently underserved market, along with strong momentum on the legislative front, provides the potential to create an environment of continuous category expansion for many years to come. We see ourselves as the premier brand in digital sports entertainment. We are currently one of the leading U.S. digital sportsbooks and have the number one rated daily fantasy sports and sportsbook apps in the country. Through the acquisition of SB Tech, we have created the only vertically integrated sports betting company in the U.S. enabling us to be the product innovation leader for American sports with a clear focus on the American sports fan. Finally, we have differentiated economics and online gaming due to our strong CAC and LTV metrics, driven by our large and growing fantasy sports database, a strong and well-known brand, significant expertise and infrastructure around marketing, and robust cross-sell metrics powered by years of investment in data science and analytics. Additionally, we have a clear state entry playbook to drive long-term profitability, Turning to current events, I want to provide an overview of how we are responding to COVID-19. Certainly, the current environment of major sports leagues and major sporting events has created short-term revenue headwinds for the business. However, we are now in a strong position with nearly half a billion dollars of cash on our balance sheet. Additionally, our long-term growth expectations remain unchanged and under certain scenarios may even accelerate. While no one can predict exactly how COVID-19 will affect the world and for how long, we are confident that when sports return, will be ready. As we have taken steps to navigate the short-term impacts of the crisis, we have also been planning for what the post-COVID-19 world might look like, ensuring that the actions we are taking today are putting us in the strongest possible position. Our number one priority as a company is our employees' health and safety, and our organization continues to work productively in this work-from-home environment. Our teams are making great progress on our key priorities, such as launching new states, continuously upgrading our data automation and marketing technology capabilities, and building great products for our customers. Our product and technology teams have also created new content that is keeping our customers engaged during this unique period. I would like to thank all of our tremendously talented employees who have stepped up and adapted to new working conditions without missing a beat. It has been truly remarkable to witness. On that note, I am very proud of the content that we have developed over the last two months. For example, we have built a product that allows DraftKings customers to engage in eSports events such as simulated eNASCAR, Counterstrike, and Rocket League. We developed content for lesser-known competitive sports such as table tennis. We launched a plethora of pop culture free-to-play pools contests that covered everything from the Democratic debate to TV shows like Survivor, The Last Dance, and Top Chef. We also launched simulated Madden games, and most recently we partnered with MLB on their new MLB Dream Bracket game. In parallel, we've continued to deliver on our state expansion roadmap, successfully launching both iGaming in Pennsylvania and SportsBetting in Colorado in early May. The engagement numbers that we are seeing across all of these products are a great validation that our customers are loving the content, and it also shows their passion for our products and loyalty to our brand. As we continue to monitor developments from sports leagues and teams, we are proactively planning for the variations of what the sports calendar could look like the rest of the year. With the expectation that the sports calendar will overlap like never before, Our focus is on ensuring that we are prepared for the potential increased traffic and activity. There are still a lot of unknowns about how COVID-19 will ultimately impact major sporting events, but we are confident in our ability to perform as we prepare for what we hope will be a busy global sports calendar in the second half of the year. Currently, we do not anticipate any impact to our FY 2021 or long-term plans as a result of COVID-19, assuming the sporting events calendar resumes to a normal state by 2021. There appears to be momentum with sports betting and iGaming legislation in the U.S. We are continuing to work with regulators to get our products live in states where we do not currently operate. In Q1, we launched sports betting in Iowa, and more recently we launched iGaming in Pennsylvania and online sports betting in Colorado. Additionally, an online sports betting bill became law in Virginia on April 22nd. Other states have passed legislation over the past year or so and are in the process of working towards launching operators. These states include Michigan, which passed a sports betting and iGaming law in December 2019, and Tennessee and Illinois which legalized online sports betting about a year ago. At this time, approximately 14 states are actively considering sports betting legislation. We are hopeful that we will continue to see the momentum as many states are expected to confront budget deficits. Finally, before I turn it over to our CFO, Jason Park, to detail our Q1 performance and results, I wanted to provide an overview of our priorities for the business. As always, we are focused on entering new states at the earliest opportunity. In addition to the recent news in Pennsylvania and Colorado, we are working towards launching online sports betting in other states that have passed laws, such as Illinois, Michigan, Tennessee, and Virginia. We are also in the process of working with regulators in West Virginia to hopefully launch iGaming. We will continue to invest in our product and technology capabilities as we look to stay ahead of the competition and truly differentiate our products in the market. Our ability to create new content quickly during this period was enabled by the technology and product investments we had previously made. These new products have allowed us to continue to acquire and retain users, and we will be monitoring activity on these alternate offerings once traditional sports return. Continued traction and engagement with products centered around esports and pools based on pop culture could positively affect TAC and LTV over time. Lastly, we will continue to work towards migrating to our own proprietary software and investing in live betting and other unique offerings for American sports. Strategically, we believe this will create a key differentiator for DraftKings, helping us win with consumers and partners and also improving our long-term margin profile. With that, I will now turn it over to DraftKings CFO, Jason Park.