DraftKings Inc.

Good day and thank you for standing by. Welcome to the DraftKings Q2 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mike DeLaglio, Senior Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today. Certain statements we make during this call may constitute forward-looking statements that are subject to risks, uncertainties, and other factors as discussed further in our SEC filings that could cause our actual results to differ materially from our historical results or from our forecasts. We assume no responsibility to update forward-looking statements other than as required by law. During this call, management will also discuss certain non-GAAP financial measures that we believe may be useful in evaluating DraftKings operating performance. These measures should not be considered in isolation or as a substitute for DraftKings financial results prepared in accordance with GAAP. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings release slide presentation and business update, which can be found on our website and in our quarterly report on Form 10Q filed at the SEC. Hosting the call today, we have Jason Robbins, co-founder and Chief Executive Officer of DraftKings, who will share some opening remarks and an update on our business. Following Jason's remarks, our Chief Financial Officer, Alan Ellingson, 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.

Thank you, Mike. Good morning, everyone, and thank you all for joining. DraftKings set records for revenue and adjusted EBITDA in the second quarter, as revenue growth accelerated to 37% year over year. We are pleased to be maintaining our fiscal year 2025 guidance, with revenue expected to be closer to the high end of our range, as strong underlying momentum in the business and sportsbook friendly outcomes in the second quarter position us to absorb an exciting new state launch. We are sharing five key takeaways today. First, we are in the early innings of adjusted EBITDA growth. Product enhancements are driving strong revenue growth, while prudent cost discipline and efficiency initiatives across the organization are delivering meaningful adjusted EBITDA margin expansion. Our second quarter adjusted EBITDA was over $300 million in double our prior record. Looking ahead, we have conviction in our profitability expanding further as we drive towards our 30% adjusted EBITDA margin target over time. Second, DraftKings is positioned for success this fall with the upcoming NFL and NBA seasons. We continue to innovate our number one rated sportsbook product delivering an experience that moves uniquely at the speed of sports. This manifests in a best in class live betting product, along with hyper flexible merchandising and social features that allow customers to engage with the biggest sports narratives as they unfold in real time. Third, sport outcomes tend to normalize over the long term, but typically benefit either the sportsbook or our customers in the short term. In May and June combined, sportsbook outcomes benefited the company and added $110 million to our revenue. Fourth, we continue to monitor events surrounding federally regulated prediction markets and are actively exploring ways to enhance shareholder value through this opportunity. As always, we value our relationships with both industry stakeholders and policymakers and we'll work collaboratively as we evaluate next steps. Fifth, we continue to allocate capital to target the highest risk adjusted returns and maximize shareholder returns over the long term. In the first two quarters of this year, we repurchased 6.5 million shares through our stock repurchase program while continuing to invest in organic growth initiatives. With that, I will turn it over to our chief financial officer, Alan Owens.

Thank you, Jason. I'll hit the financial highlights, including our second quarter 2025 performance and our fiscal year guidance. Please note that all income statement measures discussed, except for revenue, are on a non-GAAP adjusted EBITDA basis. As Jason mentioned, in the second quarter, we achieved company records for both revenue and adjusted EBITDA. Revenue increased 37% year over year to ,000,000 and we generated ,000,000 of adjusted EBITDA, representing a 20% adjusted EBITDA margin. Forcebook net revenue increased 45% year over year, which exceeded our expectations. Net revenue margins increased over 230 basis points year over year and also set a company record at 8.7%. Forcebook handle increased 6% year over year to approximately $11.5 billion. Live betting handle increased 16% year over year as we continue to innovate and extend our lead in that category. Fractal Forcebook hold percentage increased 100 basis points year over year to .9% and actual Forcebook hold percentage exceeded .5% due to Forcebook friendly outcomes. Our parlay handle makes increased 430 basis points year over year. Forcebook's promotional reinvestments as a percentage of gross gaming revenue improved year over year by nearly 600 basis points due to both Forcebook friendly outcomes as well as continuing optimization of promotions. We also expect to continue benefiting from existing customer accounting for a higher percentage of our overall customer mix. Our gaming net revenue was consistent with their expectations and increased 23% year over year, driven by strong growth and active gaming customers. We are continuing to see engagement with jackpots increasing rapidly as gross gaming revenue increased over 100% year over year. Our adjusted gross margin increased to 48%, increasing more than 400 basis points year over year as a result of higher Forcebook hold percentage and improved promotional efficiency across our product offerings. Our operating expenses, including marketing, continue to be in line with our expectations. We are leveraging our scale and brand to drive highly efficient customer acquisition while continuing to exert cost discipline across the organization. We are also already seeing some benefits from utilizing artificial intelligence and other new technologies. Now we'll touch on our Fiscal Year 2025 guidance. In May, we guided Fiscal Year 2025 revenue of $6.2 billion to $6.4 billion and adjusted to $800 million to $900 million. Today, we are maintaining those ranges. More specifically, we are on track to deliver revenue close to the high end of the $6.2 billion to $6.4 billion range due to Forcebook-friendly outcomes in the second quarter as well as continuing strength across our core value drivers. We are on track to deliver adjusted EBITDA near the midpoint of the $100 million to $900 million range as our higher annual revenue positions us to absorb our anticipated mobile Forcebook launch in Missouri. Notably, our guidance now includes anticipated financial impacts from DraftKings launching mobile sports betting in Missouri later this year. Our guidance also now includes anticipated financial impacts from higher tax rates in New Jersey, Louisiana, and Illinois. The company guidance for Fiscal Year 2025 does not include the potential launch of a predictions market offering. We are also providing the following Fiscal Year 2025 guidance detail. We now expect our Sportsbook revenue margin to exceed .5% ahead of the range of 7% to .5% that we had provided last quarter. We continue to expect an adjusted gross margin of 46%, an increase of more than 300 basis points year over year compared to Fiscal Year 2024. We continue to expect stock-based compensation expense to represent 6% of revenue in Fiscal Year 2025. We continue to expect free cashflow of approximately $750 million in Fiscal Year 2025. That concludes

our remarks, and we will now open the line for questions.

Thank you. At this time, we will conduct the question and answer session.

As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we

compile the Q&A roster. Our first question comes from the line of Sean Kelly

of Bank of America. Your line is now open.

Hi, good morning, everyone, and thank you for taking my question. Jason, I want to kind of start off with a multi-part question on prediction markets, if I could. So three parts here. First, just how do you think about sizing the potential investment or opportunity for DraftKings at this early stage? Second, what's the importance here of owning your own tech stack? I think we see some parallels to the way OSB was built out and kind of curious for your thoughts there. And then lastly, just how important is it to be a first mover, especially if there's a bit of a land grab here as some of these platforms start to ramp up marketing around NFL? Thank you very much.

Thanks, Sean. Good morning. So let me kind of take those in order. I think, you know, TAM is a tricky question because obviously, you know, the products are at a very nascent stage. So it depends on how they get built out. But I think, you know, the existing sort of states that we have live OSB in provide some kind of benchmark, as you think about TAM. In terms of the second question on tech, I think it's too early for us to say, you know, we're obviously evaluating different options and following the space, but we're not really, you know, intimately familiar yet with what the different technology components are. So really tough to say. And then I think on the first mover question, I do think that being an early mover in a space like this can be important. I also think that, you know, being a literal first mover may not be as important, and there are downsides to that as well. So, you know, we're evaluating. Obviously, we have a lot of stakeholders, state regulators, relationships with tribes, others that we want to make sure we consider as we think about what our different options are. And, you know, we're keeping a close eye on it and figuring out what we want to do.

Thank you. Our next

question comes from the line of David Katz of Jeffreys. The line is now open.

Good morning, and thanks for taking my question. So I wanted to, you know, I guess you already triple clicked on prediction markets, but I feel as though there probably are, you know, a dozen issues related to that as it relates to DraftKings. You know, have you done any work in terms of sort of the crossover, you know, customer? You know, are there, you know, that you touched on the relationships just a bit, which I think is, you know, seemingly one of the important issues. And, you know, you also noted, you know, state regulators. Are those, you know, conversations that are in some stage of evolution, or, you know, do we know, you know, where they're at? And I think the ultimate part of the question is, you know, how you're thinking about sort of the stock and the cash flow. You know, today's a positive day, because we, you know, we get to raise numbers a little bit, you know, for one of the first times in a while. I know there's probably ten questions in there, and I apologize for that. Thank you.

Well, I'll try to answer them. But, you know, I think a lot of the things you mentioned are considerations in why we're taking a measured approach as we think about it. And obviously, you know, hard to kind of comment on specific discussions that we may or may not be having. But I think you can assume that at this stage, you know, we're more in monitor mode in terms of active discussions like that. So, you know, a lot of what I think we need to see will come from watching how things unfold with others that are currently offering prediction markets. And I think we'll kind of have to see how that goes and evaluate. It's all happening in very fast, real time. So, you know, definitely a lot to think through.

Okay, I'll take it. Thank you.

Thank you. Our next question comes from Steven Grapling of Morgan Stanley. Your line is now open.

Hey, thanks. As we think about longer-term opportunities to streamline costs and or offset, you know, some of these tax increases, can you just help us think about what opportunities exist within state access fees, data rights fees, and or payments or otherwise? Thanks.

Yeah, I think you're right that there is a good amount of opportunity across the COG stack. So, certainly, you know, some of our agreements that are older, we believe there's some opportunity to reduce the rates there and a win-win because it'll be probably more revenue for the partner and dollars, but less as a percentage. And then, you know, on the payment side, we haven't really spent as much time as we could. And it's one of those things that we keep kind of saying we know is out there, and at some point, we're going to put a lot of effort towards optimizing, and we believe there's tremendous value to be unlocked there as well. So, definitely, I think we view that as, you know, those two things as big upside. And there are also other parts of the COG stack, too. We're constantly optimizing our systems to be more efficient so our Amazon Web Services bills don't go up at the pace of our revenue. And a number of other AI initiatives that we're embarking on now can also really help on that front as well as on the fixed cost side. So, I actually feel like as much as we talked about the revenue growth and the demand, and obviously, we're very excited about that and really excited about the growth we had this quarter, I think that there's also a ton of opportunity on the cost side. The team's really rallied around AI, which is exciting, too. I think that's just really, you know, we're really just scratching the surface now. There's going to be some big unlocks that come from that over the next several years.

Thank you.

Thank you.

Our next question comes from the line of Clark Blampen of VTIG. Your line is now open.

Thank you. I've got two. Jason, I'm going to take the bait on AI. You said that we're scratching the surface here. There are some big unlocks. It sounds like, you know, you've obviously referenced this in the shareholder letters and on calls in the past, but are we at a point where maybe that could start to have a more discernible benefit on the top line as opposed to just sort of expense optimization? Second question is on iGaming. You guys called out some headwinds and adjustments that you guys wanted to make for promos and rewards last quarter. Just curious, now that we saw a revenue acceleration, did you... did it have the benefit that you were looking for, and was that benefit sort of fully realized in Q2? Thanks a lot.

I think iGaming is starting to ramp back up to where we want it to be, but still not quite where we want it to be yet. So, the momentum is there, but I do think there's more work to be done, and I feel like there's more upside to the, you know, rate that we're growing at now. In terms of your first question, I do think that more of the focus, because it's just something we could do more organization-wide, is on the expense side. The simple, you know, sort of areas or really any kind of workflows that are manual now. All of those can be automated, and we don't necessarily need to rely on a pro... you know, on our engineering team to be able to do that. We can rely on those running the programs and those running the processes to do it with the tools that we provide at them. And then separately, we're biting off... Usually, you know, we kind of try to focus, and so I think we view there's, you know, a small handful of top-line, potential top-line driving AI initiatives that we are heavily focused on over the next six to 12 months. You know, in areas like trading is a good example where there's just so much going on at once that adding AI agents to be able to monitor and react certainly can provide some upside. So there are areas like that that I do believe will have impact on the top line. At this point, we don't have enough data yet to say what that impact could be, so, you know, we haven't really contemplated it in thinking about this or next year's guidance, but I do think that there is going to be upside on the top line that we unlock as we embark on these initiatives.

Understood. Thank you.

Our next question comes from the line of Dan Pulitzer of JPMorgan.

Please go ahead.

Hey, good morning, everyone. Thanks for taking my questions. Two-parter, first one, structural hold, accelerated 100 basis points in a quarter. Is there anything specifically you call it that's driving that, and can you talk about, you know, maybe if that resets your expectation for that 50 basis point -over-year improvement? And then secondly, you know, in late 2023, you guys had an investor day, and framed out 2026 expectations, and I think it was 1.4 billion of EBITDA. I know you're not giving updated guidance today, but there's been moving pieces in that, you know, namely the tax increases as well as, you know, Alberta timing. You know, is there any way to just frame out the impacts from those one-offs so we can better calibrate expectations for 2026? That's it. Thank you.

Yeah, great question. So, on the first one, I, you know, really think the big driver of structural hold improvement has been BetMix. Obviously, there's other things we're doing to optimize, but that's really the big driver. ParlayMix was up 430 basis points, which drove that structural hold up. So, really excited about the progress there. And then in terms of next year, I think you're right that, you know, when we did put out those numbers, we hadn't had some of these tax increases, which have amounted to, you know, around $200 million, if you look at next year. So, you know, there have been some underlying, you know, value drivers that have been outperforming too. So, I think we're able to offset some of that, but I don't think we'll be able to offset all of it.

Got it. Thanks so much.

Thank you. Our next question is from Robert Fishman of

Morphinethicin. Please go ahead.

Hi. Good morning. There are some higher profile sports streaming apps set to launch in the next few weeks ahead of football season, ESPN and Fox One come to mind. So, can you just talk about your openness to partnering with either these or other sports-focused streaming apps in general for cross-sell opportunities or potentially even look to enter into more formal, exclusive relationships going forward? And then, separately, after Flutter completed its Boyd deal with the restructured market access agreement, can you discuss the opportunity for DraftKings to rework your own market access deals, given your stronger position in the market today versus a few years ago? Thank you.

Yeah, I do think market access deals are an area of upside, along with many of the other COGS levers I mentioned earlier. So, I think you're right that there is some upside to be had there when we renegotiate some of those deals. And some of them were long-term deals, but are still coming up in the next few years because a lot of them were struck in the early days of the market, as you noted. So, definitely something we are looking at. Also, very excited about the launch of the DTC apps you mentioned. I think it's going to be great for sports viewership. It will help betting. I think too early to tell what kinds of media buying or partnership opportunities might present themselves. Obviously, we are anxiously watching, though, and seeing how that stuff unfolds. And if there's a partnership that makes sense, then we would certainly look into that.

Thank you.

Thank you. Our next question comes from Robin Farley of UBS. Please go ahead.

Great, thanks. Two questions. One is, it looks like the first quarter where your unique users on a kind of trailing 12-month basis was flat sequentially. And I don't know if the answer is as simple as, you know, you didn't maintain the users that you didn't want to. Maybe it's that simple. And then the second question, and it's semi-related, can you kind of tell us where you are these days with your split of, you know, we think about the sort of standard 80-20 split that 20% of customers providing 80% of revenue. What is that for DraftKings? Just kind of think about the tax implications for the larger players and also thinking about the size of the smaller players that aren't as meaningful if you, you know, to your revenue outlook. Thanks.

Thanks. So on the first question, the biggest thing that happened with Mupps was, you know, last year we had Jack Pocket, obviously the numbers. And this year we also had Jack Pocket, but we didn't have Jack Pocket Texas, which was, you know, a very large state for the lottery business. And obviously losing that cost to Mupps and something that, you know, affected the numbers year over year. And then, you know, in terms of the customer mix stuff you mentioned, we haven't disclosed anything exactly, but we're roughly in the range that you talked about, which I think is pretty normal. Keep in mind too, for us, you know, 20% of customers is still millions of people. So, you know, we feel like we're pretty well diversified across our base. And I wouldn't assume that all those people are super high spend. A lot of the people at the bottom end are spending 25, 50 cents, a dollar on bets. So it doesn't take much to be in the top 20% of customers.

Great, thank you.

Thank you. Our next question comes from Brent Monter of Barclays. Please go ahead.

Good morning, everybody. Thanks for taking my question. Alan, I was hoping maybe you could just give us a walk on the 2025 EBITDA reaffirmation at the midpoint. You know, if you could quantify the tax change, the Missouri launch, and then if there was, you know, anything more than sport outcomes on the good guy side, if you could break that out as well.

Yeah, I think at this point we're expecting, given Missouri is gonna launch early, early December, it'll probably have around $35 million of EBITDA impact this year. I think we've, 35 to 45, sorry, 35 to 45 million dollar EBITDA impact this year. Beyond that, the sport outcomes was the big lever in Q2 that we saw. But we did see some really strong performance of our core fundamentals of the business. Not enough that we'd adjust the guide for it necessarily or create a separate bridge item, but enough to give us some optimism in the back half of the year. Ultimately, we looked at the guide, realized that there was a chance to wiggle a little tiny bit and decided just to keep it flag, given that most of our revenues in EBITDA come in the last half of the year with the NFL and the NBA. Felt really good momentum going into the back half of the year, but don't feel like we need to necessarily lean too heavily into it this early on.

Excellent, thank you.

Thank you. Our next question comes from Jordan Bender of Citizens. Please go ahead.

Everyone, good morning. Thanks for the question. Maybe a two-part question for me. First, I'm getting your pregame handle is down year over year in the quarter. Should we expect that to grow in the second half? And then more broadly, you've been one of the more vocal operators around in play obviously, are you seeing any changes to your customer betting patterns, size of wallets, shipping of wallets, just anything you can share there? Thank you.

Yeah, so it's hard to say what pregame handle will do because we really don't even look at handle in isolation. We look at all the levers of revenue and definitely when you have, if you're trying to maximize handle, you would pump promo into the market. So in a quarter where we had really stronghold rate, we had really efficient promotion, I would expect handle to be a little lighter maybe than in a future quarter if those things weren't the case. So it's hard to sort of say because it depends on outcomes and promo rates and other things that are all moving parts and we kind of look at that as we have multiple levers to grow our revenue and ultimately land the plan where we want to. So hard to say, but we are very excited about the growth that we're seeing in game as you mentioned. We were up about 16% overall for the quarter in game, really led by baseball, which is up even more. So very excited about that and I think there's a ton of upside there. If you look at the growth that we're seeing and it doesn't seem to be slowing, I think one, it's gonna be the source of handle growth for the industry in the next probably couple of years and two, outside of any new states of course. And then two, we are the leader right now and have by far the best offering. We had over 90% uptime in all of our core live markets last quarter, which is an industry leading number. So, and we have a wider offering than anyone else in the industry. So I feel like we're really playing from a position of strength in the area that's likely to be the biggest source of growth for the handle side of the OSB market in the next few years.

Great, thank you very much.

Thank you. Our next question comes from Ben Miller of Goldman Sachs. Please go ahead.

Great, thanks for taking the question. Just on live betting again, as you think about the time spent in the app or session counts for customers engaging with in play, what are you seeing in terms around driving better conversion via personalization or even getting someone to engage with different matches or sports against those impressions? And then the second part of that is just, we've talked in the past about live betting, potentially unlocking new cohorts of customers because of the product offering. Just what are you seeing around that front as well? Thanks so much.

Yeah, so I think when it comes to personalization, we are still really early days of what we think we can do. So I actually think there's a good bit of upside there. And from some of the things that we have implemented to date, we are seeing really strong results in terms of engagement. So I do think there's a lot of upside on that front. And sorry, what was the second question? Can you say it one more time?

Yeah, just around the potential for live betting to unlock new cohorts.

Oh, like new acquisition? Well, I do think one of the things that's good about live betting is if you miss the start of the game, you can still get a bet in. And a lot of people don't know that. So I think as the education around that continues, it's going to create more efficient in-game customer acquisition for us. And it'll extend the window of time that we can acquire customers. I'm not sure so much that you're going to get an incremental type of customer because so much of what people do is similar to pre-match. I mean, there's different bet types, but it's the same general activity. But I do think that having a larger window to be able to acquire customers and having the education out there that you can get your bet in any time, even if the game started already will help.

Great, thanks so much.

Thank you. Our next question comes from Jed Kelly of Oppenheimer

and Co Inc. Please go ahead.

Hey, great. Thanks for taking my question. Can you speak to any July handle trends or July hold trends that you're seeing and how the outlook for handle is in the back half of the year? And then just touching back on iGaming, can you talk about where you think you are competitively with the iGaming first player versus the sports book first customer? Thanks.

So I think first on the handle question, a little bit of a different sport calendar, the Copa and Euros were big last year for soccer. So soccer handle was not as strong, but all the other major sports handle was up double digits year over year. So baseball, basketball, everything, not basketball, excuse me, baseball, golf, everything else, combat sports, everything was up. Double digits year over year. And also we didn't have Olympics in July this year, we did last year, so that made a little bit of a difference too. So some schedule differences, but all the major sports were showing good, strong double digit handle growth. And then your question on iGaming, I actually think you're right, that that's where the biggest opportunity in the most growth lies. I think we are leading the pack as it comes to the cross-sell and conversion of sports book into customers, into iGaming players, and feel like for that reason, we have really done well to own the table game space in a big way. And I think where we have our big opportunities with that slots casino first player that we believe there's many, many more out there using competitor apps that we will be able to provide a great offering. And maybe at this point, don't think of DraftKings as much as a place that they would go do that and think of us more as a sports brand. So I think there's a lot of good stuff on the product side and feel really good about that. And I think really, there's a big opportunity to continue to build our brand and reach that slots first customer.

Thank

you. Our next question comes from Ryan Sickdahl of craighallam.com.

Please go ahead.

Hey, good morning guys. What a folks on Illinois, wager tax, you guys are passing that along as our fan dual fanatics, some of your main peers and competitors. I guess, curious what your assumptions are and how you think about that market and what passing that on it, I know it'll be a new experience for the consumer, but what you think that'll mean from a market share standpoint, and then also from a in market TAM standpoint.

So, I think the short answer is, I don't really know because this is unprecedented. The way that Illinois implemented the tax, there really wasn't a good solution here. Because if you take low dollar bets, you either charge a pass through or you don't offer them. And we did see some other operators choose instead to go with minimum bet sizes, which I think there's some pros and cons to different approaches, but we felt like this was the best approach. It gave the customer at least an option if they wanted to still make lower dollar bets, even if they did have to pay the pass through tax along with it. But again, the way Illinois implemented this, there really isn't a great solution. I'm hoping that they fix it. There's gotta be a better way to do it. And at this point, really hard to say what it's going to do. I don't think it's gonna have zero impact, that's for sure. And that was part of what Alan mentioned we had baked in as we thought about the impacts of tax increases in our guidance looking forward this year. And at the same time, it's really hard to know because we haven't seen a tax like this before per wager tax, so it's kind of uncharted territory.

Fair enough, thanks Jason.

Thank you. Next question comes from Ben Checken of

Mizuho. Please go ahead.

Hey, good morning. Thanks for taking my question. Anything you can share on the, you helped us with the EBITDA guide for Missouri, but just the expectations around the pace of customer acquisition, anything you're doing differently with this launch, should this be faster than the normal relative to some of the other metrics you've shared previously? I think in the past, you've talked about kind of like mid single digit percentage of the population in the first 90 days and then any color on CAC expectations. And parallel to this, you may not wanna touch it, but directionally, X jackpot, was your external marketing close to flat year over year? Thanks.

Yes, basically to the second question. But on the first question, I think each state we get a little bit better, but I would expect Missouri to look largely like last couple of state launches that we did in terms of timing. I do think for some reasons that were restrictions in the last launch in North Carolina from the regulators, we probably got off to a little bit of a later start than we will in Missouri. So I think if you look at Missouri, you're gonna end up with a little bit, maybe more acceleration than that one. But I think if you look back to the last few launches before that, Ohio, Massachusetts, it'll look more like that. All that said, the timing of the year is different too. This is gonna be happening right in the middle of NFL season. So that'll probably change the pace and the curve also. I would expect maybe a little bit more of an accelerated curve for that reason too. But overall, I don't think any reason to kind of model out too differently than what you've seen us do in the past in terms of mid single digits. Maybe there's some upside there. And I think the CAACS will be fantastic because it'll be right smack in the middle of NFL, NBA will be having all the major sports outside of baseball will be happening. So I think you're gonna see really good CAACS.

Thank you.

Thank

you. Our next

question comes from Joe Staff or Suski Hanna. Please go ahead.

Good morning, Jason, Alan. Wondering if you could talk about your approach for customer acquisition in the third quarter, obviously a seasonal high point for that activity and just how we should think about, you realizing further promotional efficiencies. And then for my second question, just to follow up on Jackpocket, with Texas out of the user base, just wondering if you could remind us what are the biggest states now, kind of within the user base of Jackpocket.

So on the second question, New York is now the biggest, New Jersey is fairly large. So those are some of the big ones. But obviously, Jackpocket's in about 18 states now. So lots of diversification across many states. As for your first question on the customer acquisition side, I think, as you noted, this is one of the most important times of the year for us from a customer acquisition perspective. So obviously lots of good stuff planned. I feel pretty good about where we're going to be competitively. I think that we will be more efficient this year as we continue to optimize, but also we'll have more mature states this year. So I don't know where that's gonna net out. And then obviously we have the Missouri launch coming a little bit later in Q4. So that'll be something we're gearing up for as well.

Thank you.

Thank you. Our next question comes from the line of Barry Jonas of Trust Securities. Please go ahead.

Hey, good morning, guys. It's Patrick Keough on for Barry this morning. Thank you for taking our questions. I have two around tax mitigation for you. First, with the Illinois surcharge pending, could you clarify how that revenue will be taxed and how are you thinking about possibly rolling out surcharges to other high tax jurisdictions? Second, sports book pricing has been an interesting topic to us. We're curious how you think about balancing that competitive dynamic with customer awareness and profit potential. Does tweaking pricing weigh in as you think about mitigation? Thank you so much.

Yeah, I think tweaking pricing is something you need to consider. And some of it will depend on your first question, tax treatment. Our position is this with the pass-through and it shouldn't be taxed. I think Illinois has taken a little bit of a different view on it. So we're gonna try to obviously resolve that before we implement the charge, which isn't happening until September 1st. But the intent was to be a pass-through. I think if it ends up being treated as taxable revenue, then there's really no benefit to do that versus incorporating into the pricing. So that is something that we'd have to consider. But right now, I think this is the current plan. And then in terms of other states, I think we have to see how this one goes. I mean, this will be a really interesting experiment to find out what the sort of net effects of implementing such a charge will be. And that'll give us great data upon which to rely as we think about other states that may have higher tax rates and what we wanna do there.

Thank you.

Our next question comes from the line of Brian Pitts of BMO Capital Markets. Please go ahead.

Good morning. Thank you very much for the question. I actually wanna ask about maybe some of the micro-betting with reports suggesting New Jersey is pursuing banning micro-betting and really in the context to your live betting, I guess now over 50% of total handle that you mentioned. Can you help us understand how big micro-betting component is and how much risk you think that ban could actually be? Thank you.

I see that as very, very low likelihood. It was just a piece of legislation put out by somebody. I mean, New Jersey offers online slots. I don't know how they could possibly be looking at micro-betting is the great scourge. But as far as micro-betting in terms of size, it's not that large for us. It's a single digit percentage of handle, of live handle, I think even as well. So, meaningful, but not something that, I would say is a huge component. But at the same time, bills get introduced all the time that don't really, I think have much of a chance of advancing and I think this is one of them.

Great, thank you.

Thank you. Our last question is from Bernie McTernan of Nehm and Company. Please go ahead.

Great, thanks for taking the question. Just wanted to stay on in-play betting and given the simple acquisition closed late last year, this will be the first NFL season of you guys owning the assets. Just wanted to see how you expected to play into your new products you're bringing to market this NFL season and how it plays into your expectations for second half handle trends.

Yeah, simple bet's been great for us. I think the team is really gelled with our team and I think a big part really of why we are leading right now in live betting has been the addition of their team and their technology that we brought on. So, really excited about having them here for a full NFL season and I think the work that's been put in over the last year is gonna show.

This concludes the question and answer session. I will now turn it back

to Jason Robbins.

Thank you all for joining us on today's call. We're excited to be well positioned for continued success in the future. Thank you for your continued support.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.